HomeMy WebLinkAbout2020-10-28 AEA Agenda and docs 813 W Northern Lights Blvd., Anchorage, AK 99503 Phone:(907) 771-3000 Fax:(907) 771-3044 Toll Free (Alaska Only): (888) 300-8534
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
Alaska Energy Authority
Board Meeting
October 28, 2020
AGENDA
Dial 1 (888) 585-9008 and enter code 624-926-808#. Public comment guidelines are below.
1.CALL TO ORDER
2.ROLL CALL BOARD MEMBERS
3.AGENDA APPROVAL
4.PRIOR MINUTES – September 16, 2020
5.PUBLIC COMMENTS (2 minutes per person) see call in number above
6.EXECUTIVE SESSION - Confidential matters related to Bradley Lake, Soldotna Quartz Line,
and budget matters)
7.NEW BUSINESS – Presentation of 2020 AEA Audited Financial Report, Audit Report
and Examination.
8.OLD BUSINESS – Soldotna Quartz Line
A.Utilities Approval (Resolutions)
B.Required Project Report (EEO)
C.Permits Update
D.S/Q Line Valuation
9.DIRECTOR COMMENTS
A.Response to Board Questions (Baxter Senior Living)
B.DOE Building Technologies – Grant Application
C.BUILD 21 Grant Update
D.C-Pace Update---Municipality of Anchorage
E.Rural Update
F.Denali Commission Update
G.Renewable Energy Fund---Update
H.Power Project Fund Dashboard and Loan Report
I.Community Outreach Schedule
J.Articles of Interest
K.Next Regularly Scheduled AEA Board Meeting Wednesday, December 2, 2020
10.BOARD COMMENTS
11.ADJOURNMENT (Next Meeting December 2, 2020)
Alaska Energy Authority Page 2 of 2
Public Comment Guidelines
Members of the public who wish to provide written comments, please email your comments to
publiccomment@aidea.org by no later than 4 p.m. on the day prior to the Board meeting, so they can be
shared with board members before the meeting. When you call in, you will enter the teleconference muted. After board roll call and agenda approval, we will
ask callers to press *9 on their phones if they wish to make a public comment. This will initiate the hand-
raising function.
We will unmute callers individually in the order the calls were received. When an individual is unmuted, you
will hear, “It is now your turn to speak.” Please identify yourself and make your public comments.
Alaska Electric and Energy Cooperative, Inc. 3977 Lake Street Homer, Alaska 99603 (907) 235-8551
RESOLUTION 01.2020.13
APPROVAL OF FINANCING OF ALASKA ENERGY AUTHORITY
PROPOSED TRANSACTION
PURPOSE OF RESOLUTION
This Resolution No. 01.2020.13 is being prepared for the governing Board of Alaska Electric and
Energy Cooperative, Inc. (AEEC), a utility-member of the Bradley Lake Project Management
Committee (BPMC), in order to: 1) confirm that the Proposed Transaction is based on sound economics
from the perspective of AEEC; and 2) to approve the preliminary terms and conditions of the financing
for the Proposed Transaction.
BACKGROUND
The Proposed Transaction: On May 22, 2020 Alaska Energy Authority (AEA), Homer Electric
Association, Inc. for itself and in its capacity of the sole member of Alaska Electric and Energy
Cooperative, Inc. (HEA), entered into a Letter of Intent containing the terms and conditions under
which AEA would purchase and HEA would sell certain electric transmission facilities and properties
that are currently used by HEA to provide electric service to Purchasers of the power generated by the
Bradley Lake Hydroelectric Project (Proposed Transaction). The Proposed Transaction is comprised
of the following components:
1. Acquisition of transmission capacity rights in the Soldotna to Sterling Transmission Line
(subject to reservation for HEA’s native load requirements);
2. All of HEA’s property rights in the Sterling to Quartz Creek Transmission Line;
3. All of HEA’s property rights to 69kV Line;
4. Reimbursement of the costs incurred by HEA to restore the Sterling to Quartz Creek
Transmission Line (Swan Lake Fire damages); and
5. Settlement of the ongoing litigation concerning Kenai Peninsula transmission issues.
The assets acquired in the Proposed Transaction will become Project Assets of the Bradley Lake
Hydroelectric Project (Project) and will be operated as part of the Project which is managed by the
BPMC.
REQUIRED WORK DETERMINATION
It is a condition precedent to the Closing of the Proposed Transaction that the Proposed Transaction be
deemed to be “Required Work” as that term is defined in the Power Sales Agreement1. If the Proposed
Transaction is determined to be Required Work, the cost of the Proposed Transaction would be
considered Project Costs and be paid from the Excess Payments to be made in the future under the
Power Sales Agreement.
The Department of Law for the State of Alaska (DOL) issued a Memorandum Opinion dated May 20,
2020 finding that the definition of Required Work set forth in the Power Sales Agreement could include
the Proposed Transaction. The DOL Memorandum Opinion stated that additional analysis should be
done with respect to whether the Proposed Transaction is consistent with sound economics and national
1Required Work is defined in the Power Sales Agreement to mean “…repairs, maintenance, renewals, replacements,
improvements or betterments required by federal or state law, a licensing or regulatory agency with jurisdiction over
the Project, or this Agreement, or otherwise necessary to keep the Project in good and efficient operating condition,
consistent with ( 1) sound economics for the Project and the Purchasers, and (2) national standards for the industry.”
See PSA at Required Project Work, Section 1(hh).
Resolution 01.2020.13, APPROVAL OF FINANCING OF ALASKA ENERGY AUTHORITY PROPOSED TRANSACTION
Page 2 of 4
Alaska Electric & Energy Cooperative, Inc. (907) 235-8551
standards. AEA deemed it appropriate for the BPMC’s O&D Committee (Bradley O&D) to perform
the analysis to satisfy the requirement set forth in the DOL Memorandum Opinion. The Bradley O&D
has reviewed the Proposed Transaction and concluded that the Proposed Transaction is based on sound
economics for the Project and qualifies as Required Work as that term is defined in the Power Purchase
Agreement. The BPMC has adopted the Bradley O&D Report in its Resolution No. 20-02 dated July
24, 20202. The BPMC considers the Proposed Transaction to be the foundation for future upgrades to
the Railbelt Transmission System.
The definition of Required Work requires a determination that the Proposed Transaction be necessary
to keep the Project in good and efficient operating condition consistent with sound economics for the
Project and the Purchasers. As noted above, the Bradley O&D has determined that the Proposed
Transaction is based on sound economics for the Project. The economic result of the Proposed
Transaction for each Purchaser of power generated by the Project is that there is a positive economic
affect through increased reliability of the Project and transmission facilities of same as well as the
significant long-term benefits garnered with the planned upgrading of the lines delivering power
generated by the Project. The Proposed Transaction should eventually result in increased amounts of
power from the Project being transmitted off the Kenai Peninsula thus reducing the cost of the unit of
power and increasing the amount of power available; both economically sound results for HEA and
AEEC.
FINANCING OF THE PROPOSED TRANSACTION
The BPMC is responsible for selection among alternative methods for funding Required Project Work
that involves AEA. The Purchasers of the power generated by the Project are responsible for the cost
of Required Work (in this case, the Proposed Transaction) under the terms of the Power Sales
Agreement. AEA has been working with the Alaska Industrial and Development Export Authority
(AIDEA) on financing the Proposed Transaction with Private Placement Funding under the Sustainable
Energy Transmission and Supply (SETS) (AS 44.88.650 – 44.88.690). The BPMC gave its preliminary
approval of the preliminary terms and conditions for financing the Proposed Transaction in its
Resolution No. 20-03 dated July 24, 2020. The final approval of the BPMC is subject to the receipt of
the requisite approval of the governing bodies of the individual BPMC Members.
In its Resolution 20-07 dated August 5, 2020 the Board of Directors of the AEA reviewed the
preliminary terms and conditions of the financing for the Proposed Transaction and approved the terms
and conditions as well as stated support for the Proposed Transaction 3.
In addition to the BPMC’s approval being conditioned on the requisite approval of the governing
bodies of the individual BPMC Members, it will be a requirement of the financing that the governing
boards of the individual Purchasing Utilities approve the Preliminary Terms and Conditions.
2 The Bradley O&D Report is Attached to this Resolution.
3 The Preliminary Terms and Conditions are attached to this Resolution.
Alaska Electric & Energy Cooperative, Inc.
3977 Lake Street Homer, Alaska 99603 (907) 235-8551
Alaska Electric & Energy Cooperative, Inc. (907) 235-8551
RESOLUTION 01.2020.13
APPROVAL OF FINANCING OF ALASKA ENERGY AUTHORITY
PROPOSED TRANSACTION
WHEREAS, Alaska Electric and Energy Cooperative, Inc. (AEEC) is a Purchaser of the
power generated by the Project for the benefit of its member Homer Electric Association, Inc.
(HEA);
WHEREAS, AEEC is a Member of the BPMC which manages the Project;
WHEREAS, On May 22, 2020 AEA, HEA entered into a Letter of Intent for the Proposed
Transaction;
WHEREAS, On July 17, 2020 the Bradley O&D issued its Report on the Proposed
Transaction concluding that the Proposed Transaction: (i) is based on sound economics for the
Project, (ii) is fully consistent with the meaning of “Prudent Utility Practice” as defined by the
Power Revenue Bond Resolution, (iii) meets the national standards for the electric utility industry
and (iv) is Required Work as that term is defined in the Power Purchase Agreement;
WHEREAS, BPMC Resolution No. 20-02 dated July 24, 2020, adopted the Bradley
O&D Report which contained the conclusion of the Bradley O&D that the Proposed Transaction is
Required Work under the Power Sales Agreement;
WHEREAS, The BPMC supports the Proposed Transaction subject to any required
final approval of the governing bodies of the individual Members;
WHEREAS, AEEC has reviewed and considered the Report on the Proposed
Transaction prepared by the Bradley O&D and approved by the BPMC;
WHEREAS, AEEC has concluded that the Proposed Transaction is based on sound
economics from its perspective as a Purchaser;
WHEREAS, The BPMC is responsible for selection among alternative methods that involve
AEA for funding Required Project Work;
WHEREAS, AEA has worked with AIDEA on financing the Proposed Transaction
with Private Placement Funding under the Sustainable Energy Transmission and Supply
(SETS) (AS 44.88.650 – 44.88.690);
WHEREAS, The BPMC is responsible for selection among alternative methods that involve
AEA for funding Required Project Work;
WHEREAS, the BPMC has reviewed and approved the preliminary terms and conditions for
financing the Proposed Transaction subject to certain identified changes and any required
final approval of the governing bodies of the individual Members in its Resolution No. 20-03 dated
July 24, 2020;
Resolution 01.2020.13, APPROVAL OF FINANCING OF ALASKA ENERGY AUTHORITY PROPOSED TRANSACTION
Page 4 of 4
Alaska Electric & Energy Cooperative, Inc. (907)235-8551
WHEREAS, the Members of the BPMC would like an indication from their respective
governing boards whether the terms and conditions for financing the Proposed Transaction that AEA
has worked out with AIDEA are acceptable to the individual utilities comprising the BPMC; and
WHEREAS, it will be a requirement of the financing that the governing Boards of the
individual Purchasing Utilities approve the Preliminary Terms and Conditions.
THEREFORE, BE IT RESOLVED THAT the documents referenced above and attached
hereto shall be made part of and incorporated in this Resolution No. 01.2020.13;
BE IT ALSO RESOLVED THAT Board of Directors of AEEC have carefully reviewed and
considered the cost and benefits of the Proposed Transaction;
BE IT ALSO RESOLVED THAT the Board of Directors of AEEC supports the Proposed
Transaction;
BE IT ALSO RESOLVED THAT the Board of Directors of AEEC have reviewed the Report
prepared by the Bradley O&D and finds that that the Proposed Transaction is based on sound
economics from the perspective of AEEC, a Purchaser of power generated by the Project;
BE IT ALSO RESOLVED THAT the Board of Directors of AEEC have reviewed the
preliminary financing terms and conditions attached to AEA Resolution 2020-07;
BE IT ALSO RESOLVED THAT the Board of Directors of AEEC approves the preliminary
terms and conditions for financing the Proposed Transaction that were approved by the BPMC and
AEA; and
BE IT ALSO RESOLVED THAT the Management of AEEC be authorized to do all things
necessary to effectuate the intent of this Resolution and support the Proposed Transaction.
CERTIFICATION
I, Ed Oberts, do hereby certify that I am the Secretary/Treasurer of Alaska Electric & Energy
Cooperative, Inc., and that the foregoing resolution was adopted at a meeting of the Directors of Alaska
Electric & Energy Cooperative, Inc., held on August 11, 2020, at which meeting a quorum was present.
Ed Oberts, Secretary/Treasurer
{00056322.2} Page 1 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Bradley Lake Project Management Committee
Report of the Bradley O&D Committee
Review of the Proposed Transaction
On May 22, 2020 Alaska Energy Authority (AEA) and Homer Electric Association, Inc. (HEA)
entered into a Letter of Intent containing the terms and conditions under which AEA would
purchase and HEA would sell certain electric transmission facilities and properties that are
currently used by HEA to provide electric service to Project Purchasers (Proposed Transaction).
The components of the Proposed Transaction are set forth in more detail in the Letter of Intent
between AEA and HEA.1 Each component provides value for the Proposed Transaction. This
Report focuses on the transmission facilities serving the Project; specifically, the Sterling to
Quartz Creek Line (SSQ line).
At the request of the Bradley Lake Project Management Committee (BPMC), the Bradley O&D
Committee (Bradley O&D) has performed the review and analyses described below on the
Proposed Transaction which confirms the Proposed Transaction is consistent with Prudent Utility
Practice for the industry and is necessary to keep the Bradley Lake Hydroelectric Project (Project)
in good and efficient operating condition and therefore qualifies as “Required Project Work” under
the Agreement for the Sale and Purchase of Electric Power (Power Sales Agreement). The
Proposed Transaction will allow more resources to be available for managing the scheduled and
unscheduled maintenance on the SSQ line. The Proposed Transaction will be more in line with
the utility practice of cost causer is cost payer with respect to the obligations and responsibilities
associated with the SSQ line. The Proposed Transaction will also clear the way for future
upgrades to the transmission facilities serving the Project. Based on the O&D analysis, upgrading
the new line will save power and reduce utility system stress making the project more efficient
and reliable. As explained in more detail later in this Report, the Proposed Transaction is
1 The Proposed Transaction is comprised of AEA paying HEA a total of $13,300,000.00 for: 1) all of HEA’s
property rights in the SSQ line; 2) capacity rights in the Soldotna to Sterling Line (SS Line), subject to
reservation for HEA’s native load requirements; 3) the ability for AEA to direct HEA to repair and upgrade
the SS Line; 4) all of HEA’s property rights in the HEA’s 69kV Line; and, reimbursement of the costs incurred
by HEA to restore the SSQ line (Swan Lake Fire). The price will be allocated for each component of the
transaction accordingly. There is also some additional amounts being obtained to provide for some
immediate maintenance issues and the cost of financing and transferring the assets. This Report
concentrates its economic analyses on the SSQ line which is the source of much of the benefits.
{00056322.2} Page 2 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
consistent with the definition of “Prudent Utility Practice” as that term is defined in the Power
Revenue Bond Resolution.
The SSQ line is operated at 115 kV and crosses land owned by private individuals as well as
several government entities, including the Kenai National Wildlife Refuge. It should be noted that
acquiring a new right of way in a national wildlife refuge requires an act of the US Congress. The
transmission line utilizes wood pole construction over a combination of mountainous and swampy
terrain. The line was originally constructed to interconnect HEA and Chugach Electric Association
Inc. (Chugach) service territories and later was utilized to provide the pathway to access Project
power by the northern utilities (located North of the Kenai Peninsula, i.e., Golden Valley Electric
Association (GVEA), Matanuska Electric Association (MEA), and Anchorage Municipal Light and
Power (ML&P), Chugach, City of Seward d/b/a Seward Electric System (SES)). The line is rated
for 75 MW during normal operation and 85 MW during emergency operation such as Pending
Spill at the Project. Because the Project is rated at 120 MW, the transmission line is not capable
of transporting all participants full capacity share at the same time.
Methodology
To prepare this report, the Bradley O&D members sought to identify the economic benefits and
applicable industry standards that apply to the Proposed Transaction generally, and more
specifically, to the SSQ line. Bradley O&D members gathered SCADA, modeling and financial
information for each utility receiving power from the Project. In addition to reviewing real time data,
the following documents were reviewed.
• National and Railbelt Reliability Standards
• Power Sales Agreement (PSA)
• Letter of Intent between the AEA and HEA, with Attachments (AEA/HEA Letter of Intent)
• 2017 AEA Railbelt Transmission Plan and Economic Analysis
• Definition of “Prudent Utility Practice” used in the Power Revenue Bond Resolution
In order to establish the cost of the SSQ line operation, HEA, GVEA, ML&P, MEA and Chugach
gathered and analyzed the information to determine the economic impact to the respective utilities
during periods when the SSQ line is out of service. This information provided an estimate of the
economic impact when the SSQ line is out of service. SCADA data and economic information
gathered included:
• Hourly power data at Sterling and Quartz Creek Substations
• Generation Data
{00056322.2} Page 3 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
• Fuel-related Data
• Avoided Cost Data
• Swan Lake Fire Impact Data
Power Sales Agreement
Under the PSA, work determined to be “Required Project Work” will be performed under AEA’s
overview, and paid for by Bradley Participants, Section 4(c).
“The Authority shall make or cause to be made all Required Project Work, provided that funds are
legally available to the Authority for this purpose. The costs of Required Project Work shall be
included in Annual Project Costs in the manner set forth in Section 8(a) (iv). The Authority shall
give reasonable notification to all Purchasers prior to making or causing to be made any Required
Project Work. Alternative methods (if any) of carrying out and funding Required Project Work shall
be subject to approval by the Committee under rules of procedure to be adopted pursuant to
Section 13.” See PSA at Required Project Work, Section 4(c)
“Required Project Work means repairs, maintenance, renewals, replacements, improvements or
betterments required by federal or state law, a licensing or regulatory agency with jurisdiction over
the Project, or this Agreement, or otherwise necessary to keep the Project in good and efficient
operating condition, consistent with ( 1) sound economics for the Project and the Purchasers, and
(2) national standards for the industry.” See PSA at Required Project Work, Section 1(hh)
Therefore, for the Proposed Transaction to be considered “Required Work” under the PSA the
work must be intended to keep the project in good and efficient operating condition. The measures
of this must: (1) be based on sound economics for the Project and the Purchasers, and (2) be
consistent with national standards for the industry.
AEA/HEA Letter of Intent
AEA/HEA Letter of Intent proposes an AEA purchase price of $13.3 million dollars 2 in exchange
for:
• Capacity rights in the Soldotna to Sterling line (SS line)
• Ability for AEA to direct HEA to repair and upgrade SS Line
• All of HEA’s property rights in the SSQ line
2 There are also some additional monies allocated for financing and required repairs and maintenance.
{00056322.2} Page 4 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
• All of HEA’s property rights in the 69 kV Line
• Reimbursement of the cost to restore the SSQ line (Swan Lake Fire damage)
Prudent Utility Practice
The definition of “Prudent Utility Practice” used in the Power Revenue Bond Resolution provides
that for purposes of the Power Revenue Bond Resolution "national standards for the industry"
shall be deemed to be defined by Prudent Utility Practice. The Bradley O&D reviewed the
definition of “Prudent Utility Practice” used in the Power Revenue Bond Resolution to ascertain
whether the Proposed Transaction meets the requirements of the definition of “Required Work”
as set forth in the PSA.
Swan Lake Fire
The impact of the Swan Lake Fire on the SSQ line started August 28, 2019 when the line was
taken out of service for safety reasons at the request of the U.S. Forest Service. The SSQ line
remained out of service until December 19, 2019, for a total of 123 days. The fire initially impacted
the SSQ line in the south end but eventually impacted a larger section of the line extending into
the mountains at the north end of the line. Because HEA owns the SSQ line and associated
easements, ROWs, and access permits, it was their responsibility to work with the fire officials as
well as ensure the line was ready to be placed back in service once the fire no longer impacted
the SSQ line. This included making repairs to the line as needed.
When the SSQ line was taken out of service, all the utilities north of the SSQ line (i.e., Chugach,
ML&P, MEA, GVEA and SES) were unable to access their Project Power, substantially reducing
the amount of water that could be used. The line outage also required the Bradley plant operate
only a single unit. Due to above average water inflows in the months before the fire, as well as
plant outages earlier in the year, the Bradley Lake water level was abnormally high.
As a result, just hours after the SSQ line was taken out of service, the lake level reached 1175’
requiring the project dispatcher to declare “Pending Spill”. Pending Spill is a condition where the
rules of water usage change. Under these rules any participant is allowed to exceed their
percentage share of participation in the Project output if it is available to prevent water spill. HEA
started utilizing as much water as practical in an attempt to prevent spill but it proved to be
inevitable and water spill did occur. See Table 1 for the amount of water allocated during Pending
Spill.
{00056322.2} Page 5 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Table 1(Acre-feet)
The Project spilled a significant amount of water with the greatest amount in the month of
September. See Table 2 below. In previous Pending Spill events, the Project Participants were
able to increase their power usage. This is partly due to the transfer limit of the tie being increased
to 85 MW when the Project enters Pending Spill. This was not possible with the SSQ line out of
service.
Table 2
16.9%25.9%12.0%30.4%13.8%1.0%
GVEA ML&P HEA Chugach MEA SES
August (2,193.43) (3,361.53) 11421.4 (3,945.58) (1,791.09) (129.79)
September (5,009.58) (7,677.40) 26085.4 (9,011.31) (4,090.66) (296.42)
October (5,761.31) (8,829.47) 29999.7 (10,363.54) (4,704.50) (340.91)
November (5,159.53) (7,907.21) 26866.2 (9,281.05) (4,213.11) (305.30)
December (3,377.28) (5,175.84) 17585.9 (6,075.11) (2,757.78) (199.84)
Total (21,501.14) (32,951.45) 111958.6 (38,676.60) (17,557.14) (1,272.26)
Water used by HEA under pending spill
acft
September GVEA ML&P HEA CEA MEA SES Totals
Water at Risk 7,581.67 15,233.65 0.00 8,396.64 17,201.81 0.00 48,413.77
% of Risk 15.66%31.47%0.00%17.34%35.53%0.00%100.00%
Allocation Volume 2,982.45 5,992.57 0.00 3,303.05 6,766.80 0.00 19,044.87
End of Month 4,599.22 9,241.08 0.00 5,093.59 10,435.01 0.00 29,368.90
acft
October GVEA ML&P HEA CEA MEA SES Totals
Water at Risk 4,573.37 9,201.48 0.00 4,714.66 10,413.92 0.00 28,903.43
% of Risk 15.82%31.84%0.00%16.31%36.03%0.00%100.00%
Allocation Volume 52.49 105.60 0.00 54.11 119.52 0.00 331.72
End of Month 4,520.88 9,095.88 0.00 4,660.55 10,294.40 0.00 28,571.71
acft
November GVEA ML&P HEA CEA MEA SES Totals
Water at Risk 4,488.70 9,046.55 0.00 4,602.66 10,268.12 0.00 28,406.03
% of Risk 15.80%31.85%0.00%16.20%36.15%0.00%100.00%
Allocation Volume 63.76 128.49 0.00 65.37 145.84 0.00 403.47
End of Month 4,424.94 8,918.06 0.00 4,537.29 10,122.28 0.00 28,002.56
acft
December GVEA ML&P HEA CEA MEA SES Totals
Water at Risk 4,391.99 8,867.56 0.00 4,478.01 10,095.37 0.00 27,832.93
% of Risk 15.78%31.86%0.00%16.09%36.27%0.00%100.00%
Allocation Volume 682.81 1,378.61 0.00 696.18 1,569.50 0.00 4,327.11
End of Month 3,709.18 7,488.95 0.00 3,781.83 8,525.87 0.00 23,505.82
4,118.71
acftTotal Spill Volume 24,107.16
September Spill Volume 19,044.87
October Spill Volume 331.72
November Spill Volume 403.47
December Spill Volume 4,327.11
{00056322.2} Page 6 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Table 2.1
Not having access to the Project Power costs $13.6 million for the 123 days of the outage related
to the Swan Lake Fire and an additional cost of $2.2 Million in lost water.
After the fire was contained, HEA hired EDM International, Inc. (EDM) to inspect the SSQ line
and provide a report on the status of the transmission line. EDM identified 43 of 127 structures
that had fire damage which included 5 structures that needed to be replaced immediately. HEA
made all the needed repairs to put the line in service. However, this left 38 damaged structures
in service and needing to be replaced.
Southern Tie outages - Bradley Participants Economics
Each Bradley Participant provided an estimate of their cost when the Southern Tie (i.e., the
transmission line connecting the Kenai region to the South Central region of the Railbelt) is out of
service. HEA established the Southern Tie is out an average of 28 days per year for scheduled
and unscheduled maintenance. Each utility provided information on their average daily cost of
alternate power and an estimate of the water spilled in the Swan Lake fire. The estimated cost
impact of lost access to the Southern Tie averages $3.1 million annually. See Table 3.
Utility
Ac/ft
Spilled Ac/ft Value Total Value
GVEA 3,781.51 200.00$ 756,302.00$
MLP 7,605.28 65.00$ 494,343.20$
HEA - 77.70$ -$
CEA 4,118.71 71.68$ 295,229.13$
MEA 8,601.66 76.93$ 661,734.31$
SES - -$
Total 24,107.16 2,207,608.64$
Bradley Spilled Water 2019
{00056322.2} Page 7 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Table 3
Loss Analysis
If the SSQ line were to be upgraded, there would be additional benefits which would be a reduction
in the losses on the line. HEA included data from 2015 through 2018 to perform the Loss analysis.
2019 was not used in the analysis due to the impact of the Swan Lake Fire. The analysis reviewed
the losses and load at 115 kV and estimated the reduction in losses at 230 kV. It was assumed
the construction would be consistent with the construction completed on the Northern part of the
tie completed by Chugach. Improvement in losses were estimated based on basic electrical
properties including the reduction of current, resistance, and reactance. The analysis estimates
as much as 11,144 MWh per year could be saved if the line is upgraded. Based on the accepted
average value of Project Power at the rate of $50/MWh this would be an additional $557,000/year
of benefit to the utilities if the SSQ line was upgraded. See Table 4.
Avg. Islanding Days Per Year 28
Utility
Avg. Daily
Cost Total Cost
GVEA 35,000$ 980,000$
MLP 6,857$ 191,996$
HEA 34,242$ 958,776$
CEA 22,221$ 622,188$
MEA 12,000$ 336,000$
SES -$
Total 3,088,960$
Southern Tie Islanding Cost
{00056322.2} Page 8 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Table 4
Projected Loss Reduction 82.8%
Actual Projected Loss
S/Q Loss GVEA MLP CEA MEA SES S/Q Loss Reduction
Jan 2015 1,332.06 8,387.00 10,196.00 12,334.00 5,599.00 406.00 229.11 1,102.95
Feb 2015 843.05 4,814.00 6,952.00 6,618.00 3,004.00 218.00 145.01 698.05
Mar 2015 644.20 4,138.00 2,349.00 13,293.00 6,034.00 437.00 110.80 533.39
Apr 2015 1,332.46 8,797.00 9,989.00 8,026.00 7,176.00 264.00 229.18 1,103.28
May 2015 1,267.15 8,239.00 8,160.00 8,773.00 7,770.00 289.00 217.95 1,049.20
Jun 2015 615.90 4,517.00 6,284.00 8,204.00 3,884.00 269.00 105.93 509.96
Jul 2015 742.83 4,131.00 5,540.00 7,209.00 3,071.00 237.00 127.77 615.07
Aug 2015 1,263.88 6,170.00 8,178.00 9,512.00 4,660.00 312.00 217.39 1,046.49
Sep 2015 2,047.49 10,007.00 11,947.00 15,433.00 8,519.00 507.00 352.17 1,695.32
Oct 2015 1,574.80 8,212.00 12,346.00 13,064.00 7,270.00 429.00 270.87 1,303.93
Nov 2015 2,448.95 10,619.00 14,959.00 14,244.00 8,652.00 468.00 421.22 2,027.73
Dec 2015 2,396.63 10,269.00 15,563.00 14,095.00 8,485.00 463.00 412.22 1,984.41
Jan 2016 1,525.15 8,420.00 11,169.00 8,141.00 6,389.00 267.00 262.33 1,262.83
Feb 2016 982.46 4,581.00 2,657.00 11,650.00 4,564.00 383.00 168.98 813.48
Mar 2016 2,160.11 9,090.00 7,417.00 23,034.72 5,272.00 756.56 371.54 1,788.57
Apr 2016 1,176.49 4,042.00 5,677.62 9,018.39 3,265.00 296.20 202.36 974.14
May 2016 186.56 - 1,945.00 3,896.00 35.00 149.00 32.09 154.47
Jun 2016 440.97 2,552.00 3,935.00 7,796.00 1,996.00 256.00 75.85 365.12
Jul 2016 732.82 4,988.00 6,335.00 9,276.00 3,167.00 305.00 126.05 606.78
Aug 2016 1,387.98 6,865.00 10,380.00 11,677.00 5,722.00 384.00 238.73 1,149.24
Sep 2016 1,707.87 9,627.00 11,855.00 9,140.00 9,033.00 300.00 293.75 1,414.11
Oct 2016 1,564.10 11,505.00 9,466.00 11,180.00 7,565.00 367.00 269.03 1,295.08
Nov 2016 1,174.98 7,426.00 8,410.00 9,766.00 6,357.00 318.00 202.10 972.89
Dec 2016 1,405.62 5,992.00 11,123.00 12,463.00 7,021.00 409.00 241.77 1,163.85
Jan 2017 1,359.29 5,067.00 10,459.00 13,232.00 7,149.00 435.00 233.80 1,125.49
Feb 2017 1,247.30 7,301.00 8,884.00 12,288.00 4,575.00 404.00 214.54 1,032.76
Mar 2017 70.56 83.00 - 6,970.00 55.00 229.00 12.14 58.42
Apr 2017 807.42 4,715.00 8,028.00 9,571.00 2,524.00 315.00 138.88 668.54
May 2017 819.46 5,898.00 7,542.00 9,941.00 3,779.00 362.00 140.95 678.51
Jun 2017 418.55 3,295.00 3,894.00 8,009.00 2,981.00 263.00 71.99 346.56
Jul 2017 728.66 4,179.00 7,258.00 9,812.00 4,434.00 322.00 125.33 603.33
Aug 2017 936.08 4,040.00 10,438.00 11,577.00 3,074.00 380.00 161.01 775.08
Sep 2017 1,212.54 4,698.00 12,758.00 12,831.00 3,459.00 421.00 208.56 1,003.98
Oct 2017 1,363.99 6,932.00 10,670.00 14,295.00 4,395.00 470.00 234.61 1,129.38
Nov 2017 1,408.74 8,590.00 10,333.00 12,888.00 4,708.00 423.00 242.30 1,166.44
Dec 2017 1,083.60 7,735.00 5,004.00 14,710.00 4,638.00 483.00 186.38 897.22
Jan 2018 1,010.41 6,661.00 8,738.00 11,287.00 3,900.00 371.00 173.79 836.62
Feb 2018 1,144.25 4,664.00 12,077.00 10,231.00 3,392.00 336.00 196.81 947.44
Mar 2018 1,075.87 4,372.00 11,477.00 12,855.00 4,048.00 422.00 185.05 890.82
Apr 2018 1,036.96 1,643.00 13,642.00 11,917.00 4,326.00 391.00 178.36 858.60
May 2018 828.66 1,242.00 11,093.00 11,625.00 3,889.00 382.00 142.53 686.13
Jun 2018 660.62 1,839.68 7,574.00 10,846.33 3,153.33 356.24 113.63 546.99
Jul 2018 573.56 2,149.79 6,068.13 10,015.06 3,050.91 328.94 98.65 474.90
Aug 2018 710.69 3,545.94 6,008.64 11,703.25 3,753.88 384.39 122.24 588.45
Sep 2018 725.22 6,844.54 3,771.60 10,301.00 3,626.13 316.00 124.74 600.48
Oct 2018 1,584.21 9,430.18 11,032.01 13,427.72 6,437.49 441.03 272.48 1,311.73
Nov 2018 908.90 6,647.00 5,793.00 11,059.75 4,377.00 363.25 156.33 752.57
Dec 2018 1,165.75 6,636.00 6,055.00 16,193.15 5,113.00 531.86 200.51 965.24
Totals 53,835.78 281,596.13 401,430.00 535,428.37 229,347.74 17,620.47 9,259.75 44,576.03
Ann. Avg.13,458.94 70,399.03 100,357.50 133,857.09 57,336.94 4,405.12 2,314.94 11,144.01
Bradley Use - Wheeling Utilities
SSQ Line Losses & Projections
{00056322.2} Page 9 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Other Project Considerations
The list of benefits of purchasing the SSQ line include:
• The end users of the line will have more direct control of its maintenance
• More resources can be focused on scheduled and unscheduled maintenance
• The allocation of O&M costs will be more in line with utility practice of cost causer is
cost payer.
• Provides a pathway for the line to be upgraded to 230 kV
• If the line is upgraded, the new line will save power making the Project more efficient.
The disposition of the SSQ line has been part of a dispute for several years. Clearly owned by
HEA, the involvement of the SSQ line as part of the Bradley Agreements has affected how the
SSQ line is to be maintained and/or upgraded. The Proposed Transaction (including the SSQ
line) will resolve these legal issues and resolves the dispute from further impacting the users of
Project power.
The SSQ line essentially does not serve HEA members; carrying power for the Northern Project
Participants. As a result, when the line was out of service, those most vested in restoration lacked
the authority to directly address the issue. The concept of the cost causer is the cost payer is
consistent with Prudent Utility Practice. This is not the case currently with the SSQ line. The
Proposed Transaction makes the Project responsible for the operation, maintenance and
upgrade of the line. That change with the relationship of parties responsible for the SSQ line
resulting from the Proposed Transaction will better reflect standard industry practices regarding
such responsibilities.
The SSQ line was built prior to the construction of the Project. The condition of the line has been
a concern for years because of its age. The damage caused by the Swan Lake Fire clarified and
accentuated the need for the upgrade of this line. The EDM report, prepared to analyze the
damage of the Swan Lake Fire, identified 43 poles damaged with 5 recommended to be replaced
prior to the line being re-energized. 30% of poles in service on the SSQ line remain damaged.
Coupled with its age, the known damage makes repair of the line critical to the reliable operation
of the SSQ line that provides access to Project power.
Without this needed maintenance, it is reasonable to assume the line’s reliability will continue to
degrade resulting in additional unplanned islanding events. Unplanned islanding events on the
{00056322.2} Page 10 of 10 – Report of the Bradley O&D Committee: Proposed Transaction
Kenai result in large frequency fluctuations causing the Project to utilize dividers that reduce the
power output from the Project quickly. These unplanned islanding events cause stress on all the
generation units online in the islanded Kenai region, including those in the Project. This is due to
the substantial mass of these machines. Increasing or decreasing power quickly in these units
results in significant stress and wear. Reducing the number of unplanned islanding events will
reduce the stress and the damage it causes which is necessary to keep the Project in good and
efficient operating condition.
The existing Kenai National Wildlife Refuge right of way is a key part of this acquisition.
Establishing a new right of way through a wildlife refuge is much more difficult and costly. A list of
values received from the proposed transactions would not be complete without including existing
right of way through the Kenai Wildlife Refuge as a part of the transaction. Transmission line right
of ways are an essential part of every transmission line.
Summary & Conclusion
The Proposed Transaction brings the operation of the transmission facilities serving the Project
more in line with utility practice of cost causer is cost payer and will also clear the way for the
transmission facilities serving the Project to be upgraded and ultimately improve system reliability.
These benefits, along with the opportunity for Project Purchasers to make considerable savings
as a result of increased reliability with the Project being more efficient, support the determination
that the Proposed Transaction is fully consistent with both the letter and intent of the meaning of
“Prudent Utility Practice” and thus the Proposed Transaction meets the national standards for the
electric utility industry as defined in the Power Revenue Bond Resolution.
The economics for the Proposed Transaction are sound. Moreover, the Project will receive access
to greater maintenance and repair resources and the alignment of cost responsibility for all of the
Project Participants. The Proposed Transaction is consistent with Prudent Utility Practice and the
national standards under which interconnected electric utilities operate; consequently, the Bradley
O&D concludes that the Proposed Transaction of the SSQ line and associated facilities and
properties is “Required Project Work” as that term is defined in the PSA.
RESOLUTION
PROPOSED ALASKA ENERGY AUTHORITY ASSET ACQUISITION
WHEREAS, Chugach Electric Association, Inc. (“Association”) is a Purchaser of the power
generated by the Bradley Lake Hydroelectric Project (“Project”);
WHEREAS, the Association is currently in the process of acquiring substantially all of the assets of
Municipal Light & Power (“ML&P”), including ML&P’s percentage interest in Project capacity and
energy output under the Project Power Sales Agreement;
WHEREAS, following the Association’s acquisition of ML&P’s interest in Project capacity and
output, Chugach will be obligated to pay Project related costs associated with ML&P’s former
capacity and output rights under the Project Power Sales Agreement;
WHEREAS, the Association is a Member of the Bradley Lake Project Management Committee
(“BPMC”) which manages the Project;
WHEREAS, On May 22, 2020 Alaska Energy Authority (“AEA”) and Homer Electric Association,
Inc. (“HEA”) entered into a Letter of Intent containing the terms and conditions under which AEA
would purchase and HEA would sell certain electric transmission facilities and properties that are
currently used by HEA to provide electric service to Purchasers of the power generated by the Project
(“Proposed Transaction”);
WHEREAS, On July 17, 2020 the Bradley O&D issued its Report on the Proposed Transaction
concluding that the Proposed Transaction: (i) is based on sound economics for the Project, (ii) is
fully consistent with the meaning of “Prudent Utility Practice” as defined by the Power Revenue
Bond Resolution, (iii) meets the national standards for the electric utility industry, and (iv) is
Required Work as that term is defined in the Bradley Lake Power Sales Agreement;
WHEREAS, BPMC Resolution No. 2020-02 dated July 24, 2020, adopted the Bradley O&D Report
which contained the conclusion of the Bradley O&D that the Proposed Transaction is Required
Work under the Power Sales Agreement;
WHEREAS, the BPMC supports the Proposed Transaction subject to final approval of the governing
bodies of the individual BPMC Members;
WHEREAS, Management has reviewed and considered the Report on the Proposed Transaction
prepared by the Bradley O&D and approved by the BPMC;
WHEREAS, Management has concluded that the Proposed Transaction is based on sound
economics from its perspective as a Purchaser and has recommended approval to the Association
Board of Directors;
WHEREAS, AEA has worked with the Alaska Industrial Development and Export Authority
(“AIDEA”) on financing the Proposed Transaction with Private Placement Funding under the
Sustainable Energy Transmission and Supply (“SETS”) program (AS 44.88.650 – 44.88.690);
WHEREAS, the BPMC is responsible for selection among alternative methods that involve AEA
for funding Required Project Work;
WHEREAS, in Resolution No. 2020-03 dated July 24, 2020, the BPMC reviewed and approved the
preliminary terms and conditions for financing the Proposed Transaction;
WHEREAS, the BPMC would like an indication from its Members’ respective governing boards
whether the terms and conditions for financing the Proposed Transaction that AEA has worked out
with AIDEA are acceptable to the individual utilities comprising the BPMC; and,
WHEREAS, it will be a requirement of the financing that the governing boards of the individual
Purchasing Utilities approve the preliminary terms and conditions of the Proposed Transaction.
THEREFORE, BE IT RESOLVED THAT, the Association’s Board of Directors supports the
Proposed Transaction;
BE IT FURTHER RESOLVED THAT, the Association’s Board of Directors approves the
preliminary terms and conditions for financing the Proposed Transaction that were approved by the
BPMC and AEA;
BE IT FURTHER RESOLVED THAT, assuming the acquisition of ML&P closes, the Association’s
Board of Directors approves the Association undertaking ML&P’s obligations under the preliminary
terms and conditions for financing the Proposed Transaction where appropriate; and,
BE IT FINALLY RESOLVED THAT that the Chief Executive Officer be, and hereby is, authorized
and empowered to take such further action and to execute and deliver (or delegate the execution and
delivery of) all such further agreements, certificates, instruments and documents, in the name and
on behalf of Chugach; to pay or cause to be paid all expenses; to take all such other actions as the
Chief Executive Officer shall deem necessary, desirable, advisable or appropriate to consummate,
effectuate, carry out, support, or further the Proposed Transaction and financing contemplated by
this Resolution; and that any and all such actions heretofore or hereafter taken by the Chief Executive
Officer hereby are, adopted, affirmed, approved, and ratified in all respects as the act and deed of
Chugach Electric Association, Inc.
CERTIFICATION
I, James Henderson, do hereby certify that I am the Secretary of Chugach Electric Association, Inc., an electric non-profit cooperative membership
corporation organized and existing under the laws of the State of Alaska: that the foregoing is a complete and correct copy of a resolution adopted
at a meeting of the Board of Directors of this corporation, duly and properly called and held on the 23rd day of September 2020; that a quorum
was present at the meeting; that the resolution is set forth in the minutes of the meeting and has not been rescinded or modified.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of this corporation on the 23rd day of September 2020.
Secretary
From: Cory Borgeson <cborgeson@cityofseward.net>
Sent: Thursday, October 15, 2020 2:57 PM
To: Curtis W. Thayer <cthayer@akenergyauthority.org>
Cc: kirk@mrg-law.com; Stephen Sowell <ssowell@cityofseward.net>
Subject: [ External Outside Email ] Seward's notice
Curtis
The City of Seward Electric Department does not have an objection to the pending SQ Line
purchase by AEA. That non objection is premised on the SQ Line being Required Project Work that will
reduce the Excess Payments the Utilities will owe under the Bradley Power Purchase Agreement.
I have had significant discussion with BPMC attorney Kirk Gibson around this issue and have
received his assurances that this is the case. I would like AEA to also acknowledge that the
reason the effort was made to make the Transmission line Required Project Work was to insure
the cost of the acquisition and all future maintenance and upgrades would reduce the Excess
Payments owed to AEA under the Bradley Power Purchase Agreement. I would consider this a
condition subsequent to the pending agreements.
Consistent with the above scenario, the Utility Manager, with the approval of the City Manager
can sign the required agreements. The Seward City Council will be briefed on the pending transaction.
Please advise if you have any questions.
Cory R. Borgeson,
Interim Seward Electric Utility Manager
410 Adams Street
P.O. Box 167
Seward, Alaska 99664
Direct (907) 224-4071
Cell (907) 362-1785
e-mail: cborgeson@cityofseward.net
From: Cory Borgeson <cborgeson@cityofseward.net>
Sent: Thursday, October 15, 2020 2:57 PM
To: Curtis W. Thayer <cthayer@akenergyauthority.org>
Cc: kirk@mrg-law.com; Stephen Sowell <ssowell@cityofseward.net>
Subject: [ External Outside Email ] Seward's notice
Curtis
The City of Seward Electric Department does not have an objection to the pending SQ Line
purchase by AEA. That non objection is premised on the SQ Line being Required Project Work that will
reduce the Excess Payments the Utilities will owe under the Bradley Power Purchase Agreement.
I have had significant discussion with BPMC attorney Kirk Gibson around this issue and have
received his assurances that this is the case. I would like AEA to also acknowledge that the
reason the effort was made to make the Transmission line Required Project Work was to insure
the cost of the acquisition and all future maintenance and upgrades would reduce the Excess
Payments owed to AEA under the Bradley Power Purchase Agreement. I would consider this a
condition subsequent to the pending agreements.
Consistent with the above scenario, the Utility Manager, with the approval of the City Manager
can sign the required agreements. The Seward City Council will be briefed on the pending transaction.
Please advise if you have any questions.
Cory R. Borgeson,
Interim Seward Electric Utility Manager
410 Adams Street
P.O. Box 167
Seward, Alaska 99664
Direct (907) 224-4071
Cell (907) 362-1785
e-mail: cborgeson@cityofseward.net
FINAL
1
September 1, 2017
September 8, 2020
Mr. David Lockard
Infrastructure Engineer
Alaska Energy Authority
813 West Northern Lights Blvd.
Anchorage, Alaska 99503
Subject: Opinion on Report of the Bradley Lake O&D Committee
Mr. Lockard:
Presented herewith is a summary of our analyses, investigations, studies and opinion with
respect to the Bradley Lake Project Management Committee’s Report on the findings and
conclusions of the Bradley O&D Committee regarding the Proposed Transaction.
Introduction
EES Consulting (EES), a GDS Associates Company, has been retained by Alaska Energy Authority
(AEA) to provide an independent opinion (Opinion) of the proposed transaction to purchase
certain transmission assets and associated property rights from Homer Electric Association, Inc.
(HEA) to be made part of the Bradley Lake Hydroelectric Project (Proposed Transaction).
The Proposed Transaction is for AEA to acquire from HEA:
1. Capacity Rights in the transmission line from Soldotna Substation to Sterling Substation
(SS Line) ‐ priority will be granted to native load requirements
2. Ability for AEA to direct HEA to repair and upgrade the SS Line
3. All of HEA’s property rights in the transmission line from Sterling Substation to Quartz
Creek Substation (SSQ Line)1
4. All of HEA’s property rights to the 69 kV line between Soldotna Substation and Quartz
Creek Substation (69 kV Line)2
1 Proposed Transaction includes a condition precedent for receipt of working permit E‐48‐KE. Transmission
upgrades to be defined by the Railbelt Reliability Council.
2 Proposed Transaction includes a condition precedent for receipt of working permit E‐47‐KE. Transmission
upgrades to be defined by the Railbelt Reliability Council.
FINAL
2
The Proposed Transaction is for a total purchase price of $13.3 million. Reimbursement of the
costs incurred by HEA to restore the SSQ Line due to the Swan Lake Fire and settlement of current
litigation is included in the purchase price. This Opinion is EES’s professional opinion on the
Analysis and Findings of the Bradley O&D Committee (O&D Report). In particular, this Opinion
addresses if the Proposed Transaction is of sound economics and national standards for prudent
utility practice.
This Opinion is Task 1 of AEA’s requested scope of work. Task 2 includes review of the power
sales agreement, the bond resolutions and the financial statements of the purchasing utilities
and AEA. Site Inspections are not a part of Task 1 or Task 2.
Power Sales Agreement
AEA is a public corporation and an agency of the state of Alaska. AEA is the State’s energy
office. In December of 1987, AEA, at that time the Alaska Power Authority, entered into an
agreement for the sale and purchase of electric power (Agreement). The Agreement details a
disposition of energy from the Bradley Lake Hydroelectric Project (Project), in which AEA sells
the output to multiple municipals and cooperatives (Purchasers) through Alaska’s Railbelt
Region. The Project is a 120‐megawatt hydroelectric project which provides 10 percent of the
Railbelt area’s energy needs. The Agreement has a 50‐year term and each Purchaser has a
share in the energy generated by the facility. For the Purchasers to the north of the Project,
such energy shares are transferred from the Project to the Purchasers via a 115 kV transmission
line between Sterling and Cooper Landing on the Kenai Peninsula of Alaska (SSQ Line).
The Agreement contemplates that work will be needed during the 50‐year term to keep the
Project in efficient operating condition. The Agreement addresses ongoing work for the Project
by breaking the work into two categories; (i) Required Project Work3; and (ii) Optional Project
Work.4
Required Project Work is defined as “repairs, maintenance, renewables, replacements,
improvements or betterments required by federal or state law, a licensing or agency with
jurisdiction over the Project, or this Agreement, or otherwise necessary to keep the Project in
good and efficient operating condition, consistent with (1) sound economics for the Project and
the Purchasers, and (2) national standards for the industry.”
Optional Project Work is defined as “Project repairs, renewals and replacements,
improvements, betterments, additions, or expansions that do not constitute Required Project
Work.”
The O&D Report determined that the Proposed Transaction is Required Project Work. EES
agrees that the Proposed Transaction is Required Project Work. Specifically, Required Project
3 Section 1 (hh), Agreement for the Sale and Purchase of Electric Power dated December 8, 1987
4 Section 1 (t), Agreement for the Sale and Purchase of Electric Power dated December 8, 1987
FINAL
3
Work includes work that is “…otherwise necessary to keep the Project in efficient operating
condition…”. This work should be “…consistent with sound economics for the Project and the
Purchasers...” and “…national standards for the industry.” EES addresses these two tests for
Project necessity separately as (1) Economics; and (2) Industry Standard.
Economics
The sound economics test for Required Project Work, extends to both the Project and the
Purchasers. It is EES’s opinion that the Projected Transaction meets the economics test for
Required Project Work as further detailed in this Opinion.
Industry Standard
The Required Project Work definition includes any improvements or betterments required by
federal or state law plus an additional efficiency test that improvements are within industry
standard. In the contiguous United States, authority over generation and transmission siting
and reliability resides with Federal Energy Regulatory Commission (FERC).5 Section 215 of the
Federal Power Act, however, carves out Alaska and Hawaii. In 2017, AEA signed a memo of
understanding (MOI) with certain Railbelt Utilities. The MOI commenced the process to create
reliability standards that are similar to those required by FERC and are considered industry
standard in the lower 48 states. These standards address transmission reliability, generation
ownership, operation and system vulnerabilities. It is EES’ opinion the industry standard for
generation and transmission reliability requires betterments and upgrades to the transmission
system such as those detailed in the Proposed Transaction. The betterments and upgrades are
consistent with Prudent Utility Practice (as that term is defined by the Bond Resolution) and
therefore should be considered Required Project Work as set forth in the Agreement.
Swan Lake Fire
As noted in the “Swan Lake Fire” section of the O&D Report, with the SSQ line out of service
none of the Project participants north of the SSQ line, which include Chugach Electric
Association (CEA), Municipal Light & Power (ML&P), Matanuska Electric Association (MEA),
Golden Valley Electric Association (GVEA) and the City of Seward (SES), could access Project
power. Because water levels were high the Project was operating under “pending spill” and
HEA utilized as much water as possible to limit spill. Table 1 of the O&D Report shows that HEA
used 111,959 acre‐feet of water while the Project was under pending spill. An acre‐foot of
water at Bradley Lake is approximately equivalent to a MWh. Even with the increased water
usage by HEA, a significant amount of water had to be spilled which adversely affected all of the
other Project Participants. Table 2.1 of the O&D Report shows that, in total, the other Project
participants spilled 24,107 acre‐feet in September through December.
5 https://www.ferc.gov/enforcement/enforce‐res/EPAct2005.pdf
FINAL
4
In order to calculate the value of the spilled water each of the participants provided a $/acre‐
feet value for spilled water. The $/acre‐feet values were determined by the cost of the
alternate generating units that had to be run to offset the power that was not received from
the Project but was otherwise delivered to Participants. The $/acre‐feet values provided by
ML&P, HEA, MEA and CEA, which serves SES, vary between $65 and $78/acre‐feet. The value
provided by GVEA is $200/acre‐feet or nearly three times greater than the average value
provided by the other Participants.
The relatively large difference between GVEA and the other participants’ values is due to the
cost of the alternate resources available to GVEA. The fuel costs associated with GVEA’s
alternate resources are significantly greater than the other participants. GVEA has no access to
natural gas and thus must use more expensive oil‐fired frame units to meet its load which
results in higher operating costs. The relatively high $/acre‐feet value provided by GVEA is due
to the fuel source and the heat rate of the units available to provide additional power when
power from the Project is not available. As noted above, the other Participants have access to
natural gas‐fired resources with lower heat rates and lower operating costs.
Even though HEA increased its use of water, the Project spilled a significant amount of water
due to the unavailability of the SSQ line. Table 2.1 of the O&D Report shows an estimated $2.2
million cost of spilled water for the four Participants that were forced to spill water due to the
unavailability of the SSQ line. This valuation seems reasonable based on the acre‐feet values
provided by the participants and the amount of water spilled in September through December.
EDM International, Inc. (EDM) determined that 43 of 127 structures were damaged by the fire.
Five of the 43 damaged structures needed to be replaced in order to put the SSQ line back in
service. Those five structures were replaced but 38 damaged structures still need to be
replaced. Since the SSQ line is owned by HEA it is HEA’s responsibility to make repairs. Since the
financial well‐beings of the four participating utilities located north of the SSQ line are at risk
when the SSQ line is out of service, from a risk management perspective it would behoove the
utilities to have an ownership stake in the line. This risk management approach to ownership
stake is prudent utility practice and is the industry standard for facilities similar to the Project.
Southern Intertie outages/Bradley Lake Participants Economics
The “Southern Intertie outages/Bradley Lake Participants Economics” section of the O&D
Report, states that, on average, the Southern Tie is out of service 28 days per year for planned
and unplanned maintenance. Table 3 of the O&D Report shows that the financial impact of 28
days of outages is estimated to be $3.1 million. This is based on the estimated cost per day of
relying on alternate power provided by the five project participants, including HEA, and
multiplying the daily outage costs for each utility by 28 days.
GVEA calculated the average daily outage cost based on the average daily system operations
costs with and without the availability of Project energy. GVEA calculated $35,000/day for
outage costs based on the fuel costs associated with the alternative resources that were called
FINAL
5
upon to provide system energy while the SSQ Line was down. GVEA’s daily outage costs varied
between $25,000 and $50,000. It is our understanding that the other utilities calculated their
average daily outage costs using a similar methodology. However, the fuel costs associated with
the alternative resources that were deployed by the other participants were significantly less
than GVEA’s fuel costs
.
ML&P has roughly a 26 percent share of Project output and GVEA has approximately a 17
percent share. However, ML&P’s average daily outage cost is $6,857 while GVEA’s average daily
outage cost is $35,000. GVEA’s average daily outage cost is five times ML&P’s average daily
outage cost even though its share of project output is only 45 percent less than ML&P’s share.
The difference is in the cost of the alternate resources. The fuel costs associated with GVEA’s
alternate resources are significantly greater than ML&P’s. The Project is the only hydro
resource in GVEA’s portfolio. Aside from a small wind project the rest of GVEA’s resource
portfolio is fueled by oil, coal and diesel. ML&P’s resource portfolio includes the Eklutna hydro
project and eight natural gas projects.
Rather than calculating the participants’ average annual costs of SSQ line outages during a
normal year, as the O&D Report did in Table 3 of the report, it is more relevant to calculate the
participants’ costs of the SSQ line outage due to the Swan Lake fire. There were two periods of
time in which, due to the Swan Lake fire, the SSQ line out of service. The first period was from
June 23rd to July 12th, and the second period was from August 18th to December 19th. Table 1
below shows the estimated cost of a 123‐day outage for GVEA, ML&P, CEA, HEA and MEA,
using the same average daily outage costs provided by the utilities in Table 3 of the O&D
Report.
Table 1
Estimated Cost of Alternate Power During 112 Day SSQ Line Outage due to Swan Lake Fire
Average Daily Cost of Outage (1) Daily Cost x 123 Days = Total Cost
GVEA $35,000 $4,305,000
ML&P $6,857 $843,411
HEA $34,242 $4,211,766
CEA (2) $22,221 $2,733,183
MEA $12,000 $1,476,000
Total $13,569,360
(1) Per Table 3 of the O&D Report.
(2) CEA provides all energy requirements to the City of Seward including the delivery of the city’s 1
percent share of Bradley Lake Project power.
While HEA did not lose its interconnection to the Project, HEA did incur incremental power
costs due to the SSQ line outage. While the line was out of service HEA was required to provide
spinning reserves equal to its’ largest contingency. This required running an additional
combustion turbine at minimum load. In addition, when HEA is operating as an isolated system,
one of the Project’s units must be shutdown to prevent the system from oscillating (system
stability). So, while HEA did have access to one generating unit at the Project, HEA needed to
run two combustion turbines to have adequate spinning reserve while it was cut off from the
FINAL
6
rest of the transmission grid and had to operate as an isolated system. Since the two
combustion turbines were not serving load but, rather, providing spinning reserves, they were
operating at very high, inefficient heat rates. This resulted in relatively high fuel costs. HEA’s
alternate resource costs shown above in Table 1 are the result of the need for additional
spinning reserves when operating as an isolated system with only one Project generating unit
operating. The alternate resource costs shown for the other utilities are the result of having to
run alternate resources to serve load due to the loss of Project generation.
As shown above the estimated cost of alternate power due to the loss of the SSQ line is roughly
$13.6 million. In our opinion, this is a more meaningful metric than the $3.1 million of outage
costs during an average year for all participants provided in Table 3 of the O&D Report.
The “Swan Lake Fire” section the O&D Report states that “not having access to the Project
Power costs $13.6 million for the 123 days of the outage related to the Swan Lake Fire”. We
were able to calculate the $13.6 million cost using the daily outage costs shown above in Table
1 and an assumption that the outage lasted 123 days.
Loss Analysis
The O&D Report analyzed the energy savings that could result from a reduction in line losses
through a comparison of losses and load at 115 kV to the losses and load at a 230 kV line.
Upgrading the transmission line would provide greater capacity to match the capacity of the
project and upgrading the line will increase reliability simply by using newer structures. EES
believes this meets the definition of Required Project Work under the Agreement under both
tests, economics and industry standard. The O&D Report quantified the value of improvement
based on basic electrical properties including the reduction of current, resistance and
reactance. The O&D report estimated additional savings of $557,000/year based on the value
of Project Power at the rate of $50/MWh. The SSQ Line Loss projections anticipate 82.8
percent reduction in line losses. It is our understanding that these loss reductions were
projected by HEA. EES believes these projections are reasonable to EES. We also believe that
the practice of upgrading lines is prudent.
Other Project Considerations
Disputes over transmission and energy delivery can be costly and can place energy deliveries at
risk. Forecasting the legal and delivery risk can be difficult; regardless, the Proposed
Transaction (including the SSQ line) will greatly reduce legal and delivery risk for the
Purchasers. The ownership of the SSQ line is currently not aligned with delivery risk. Essentially
HEA members do not see the same impact from a transmission outage as the Purchasers. The
O&D Report addressed the industry standard of cost causation. EES agrees that transferring
ownership to AEA is prudent and will better align with industry standard practices of cost
causation. EES further agrees that the Proposed Transaction will reduce delivery risk and costs
overall to the Purchasers.
FINAL
7
The SSQ line was built prior to the Project and has right of way (ROW) value that is difficult to
quantify as it runs through the Kenai National Wildlife Refuge. EES is not aware if the ROW for
the SSQ line allows for an increase in the transmission line from 115 kV to 230 kV. The value of
the Proposed Transaction would be diminished if AEA cannot upgrade the SSQ line due to ROW
limitations. Even if the ROW is limited and does not allow for upgrading the SSQ line, the
ownership of ROW through the Kenai National Wildlife Refuge has significant value.
A cost that was not included in the report is the cost of additional wear and tear on the
generating units of the Participants’ other resources that had to ramp up quickly when the
intertie was lost. These generating projects also had to generate more power during the 123
days of the SSQ line outage. There is not enough information available to estimate these costs.
These costs would have to be determined by the utilities. We believe that the Proposed
Transaction will result in a reduction in wear and tear on these generating units.
Another intangible cost that was not included in the report is the cost of increased CO2
emissions that resulted from the increase in natural gas, oil and diesel‐fired generation that was
required to serve load due to the loss of access to Project generation. While the state of Alaska
does not currently have a Renewable Portfolio Standard or a carbon policy, future state or
federal policies could increase the value of Project’s carbon‐free generation. If, due to the
passage of new legislation, the participating utilities were required to serve a percentage of
their load with renewable or carbon‐free resources and the Project was not available, the
participating utilities would have to purchase Renewable Energy Credits in order to make up for
the loss of Project generation. This is another cost risk that the four participating utilities
located north of the SSQ line are exposed to due to potential service disruptions of the SSQ line.
From a carbon cost risk management perspective, and thus prudent utility practice, it would be
appropriate for the utilities to have an ownership stake in the SSQ line.
Summary and Conclusion
We have identified three cost impacts for the four participants that were cut off from Project
power when the SSQ line was out of service.
Table 2.1 of the O&D Report shows an estimated $2.2 million cost of spilled water for
the four participants that were forced to spill water due to the unavailability of the SSQ
line. This estimate, which is based on the cost of alternative resources is reasonable.
Assuming that an acre‐foot is approximately equivalent to a MWh of Project generation,
the cost of alternate resources varies from $65/MWh to $77/MWh for ML&P, CEA and
MEA. These costs are in line with the operating costs of natural gas‐fired generating
plants. GVEA’s alternate resource cost is $200/MWh. While this is relatively high it is in
line with the expected operating costs of oil‐ or diesel‐fired generating projects.
EES estimated $13.6 million of alternate power costs incurred by the Participants due to
the SSQ line outage, as shown in Table 1.
A likely significant cost, but one that was not included in the O&D Report is the cost of
additional wear and tear on the Participants’ generating units that had to ramp up
FINAL
8
quickly when then intertie was lost and had to generate additional power during the 123
days of the SSQ line outage. There is not enough information available to estimate these
costs.
In general, the report would have benefited from additional supporting documentation. For
example, the alternate resources used to calculate the daily outage costs in Table 3 of the
report should have been identified. Providing the assumed heat rates, fuel costs and operation
and maintenance costs would make the O&D Report more comprehensive and defendable.
In addition, the O&D Report includes no information regarding how the $13.6 million of outage
costs cited on page 6 of the report was calculated. EES was able to back into that figure by
multiplying each utilities’ average daily cost (as shown above in Table 1) by 123 days.
EES has calculated the total quantifiable costs associated with loss of the SSQ line due to the
Swan Lake Fire to be $15.8 million. This includes the $2.2 million cost of spilled water and the
$13.6 million of alternate power costs discussed above. Although the Swan Lake Fire was an
extreme event, fires are a natural occurrence in a wildlife refuge, and it is not necessarily
reasonable to compare the cost of one event to the total cost of mitigation for future events. As
noted above there were additional unquantifiable costs associated with the Swan Lake fire,
such as the impact of increased wear and tear on other generating units. In addition, reducing
the risk of increased costs associated with an event like the Swan Lake fire is only one of the
financial metrics that should be considered when evaluating the benefits of the Proposed
Transaction. As well as reducing the risk of increased costs associated with events like the Swan
Lake fire the Proposed Transaction will a) be more in line with the cost causer is cost payer
principle with respect to the costs and benefits of the SSQ line, b) allow for future upgrades to
transmission facilities that serve the Project and c) make the Project more efficient and reliable.
EES’ believes that the quantified and unquantified benefits associated with the Proposed
Transaction are in excess of the cost of the Proposed Transaction and that the Proposed
Transaction is consistent with sound economics.
EES believes that the Proposed Transaction represents prudent utility practice and is within the
definition of Required Project Work. The Proposed Transaction is necessary to keep the Project
in efficient running conditions and is both economical and in accordance with industry standard
practices. Alaska is advancing reliability standards, similar to those required by FERC through
NERC in the lower 48 states. These standards will require greater transmission reliability in the
future and the Proposed Transaction will position AEA and the Purchasers to fully comply.
Very truly yours,
EES CONSULTING
813 West Northern Lights Boulevard, Anchorage, Alaska 99503 | P 907.771.3000 | Toll Free 888.300.8534 | F 907.771.3044 | WWW.AKENERGYAUTHORITY.ORG
MEMORANDUM
TO: Curtis Thayer
THRU: Kirk Warren
FROM: Betsy McGregor
DATE: October 12, 2020
RE: SSQ Line Permitting Update Per the terms of the Letter of Intent for the purchase of the transmission lines from the Sterling Substation to the Quartz Creek Substation (SSQ Line), a Task Force, made up of representatives of HEA, AEA and MEA, was formed to work with relevant governmental authorities to accomplish the transfer of the right-of-way permits and authorizations and obtain any necessary approvals/authorizations for upgrading the transmission lines operated pursuant to the permits. The 39-mile 115-kV SSQ Line runs through federal, state, borough and private properties, while what remains of the 69-kV line is limited to portions of the Kenai National Wildlife Refuge (~16 miles) and three poles on Chugach National Forest. The Task Force has secured a continuous 100-foot wide ROW for the 115-kV line, which has been confirmed by the BPMC O&D as the width necessary for future upgrades of the line. Below is an update on the status of transferring or obtaining new ROW permits for the existing SSQ Lines. HEA will retain liability for sections of the ROW until the closing date or the date at which AEA obtains a final permit, whichever comes last. When a plan for upgrading the line is developed, AEA will need to apply for permit amendments with the various landowners at that time.
US Fish & Wildlife Service (USFWS) – 22.94 miles The USFWS is in the process of amending HEA’s permits (Permit E-48-KE and Permit E-47-KE) to consolidate both the 115-kV and 69-kV Sterling Highway Segments into a single permit and provide a 100-ft wide ROW for the 115-kV line and to consolidate the remainder of HEA’s ROW for other lines into the other permit. Following completion of the amendments, the USFWS will hold a pre-application meeting with AEA to transfer the Sterling Highway Segment permit to AEA. The remaining 16 miles of the decommissioned 69-kV line will need to be removed and the USFWS will require the area to be restored. The BPMC O&D is developing a schedule for removal and restoration of the line. The initial annual land use fee is estimated to be $30,000-$35,000. The land will be appraised following transfer of the permit to AEA.
US Forest Service (USFS) – 3.28 miles The USFS has prepared a draft permit which is currently under review by the Regional Manager. There are concerns regarding insurance and indemnification given the risks associated with the transmission of power. The task force is proactively engaged, along with the State Department of Law (DOL) in efforts to resolve these issues prior to consummation of the transaction. The USFS is reviewing if the land use fee can be waived for AEA under 36 CFR 251.57(b)(1). However, land use fees associated with utility corridors are not typically waived.
Department of Natural Resources (DNR) – 0.16 miles The transfer of assignee from HEA to AEA has been completed. There is no land use fee.
813 West Northern Lights Boulevard, Anchorage, Alaska 99503 | P 907.771.3000 | Toll Free 888.300.8534 | F 907.771.3044 | WWW.AKENERGYAUTHORITY.ORG
Mental Health Trust (MHT) – 0.13 miles The transfer of assignee from HEA to AEA has been completed. There is an annual land use fee of $1,250 beginning December 9, 2020.
Kenai Peninsula Borough (KPB) – 6.08 miles Several KPB parcels are subject to the existing transmission line through a deed reservation, a ROW permit serialized as ADL 38269, or an easement dedicated by plat. For parcels where the ROW is a deed reservation or ROW permit, KPB has drafted a transfer of assignment to AEA per KPB 17.10.240(B). AEA is waiting for a response from KPB regarding land use fees.
Cook Inlet Regional Incorporated (CIRI) – 3.90 miles CIRI has issued a letter of non-objection to the transfer of the Grantee rights from HEA to AEA for the ROW permit and is not charging a land use fee.
Other Private – 2.55 miles The ROW on private lands are granted through a deed reservation, a right of way permit serialized as ADL 38269, or an easement dedicated by plat. These are transferrable and do not require a transfer of assignee for this transaction. There is no land use fee.
419 SW 11th Ave, Suite 400 | Portland, OR 97205-2605
Memorandum
To: Curtis Thayer, AEA Executive Director
Kirk Warren, AEA Director of Engineering – Owned Assets
From: Kirk H. Gibson, Counsel to the BPMC
Date: October 12, 2020
Re: Valuation of Proposed Transaction
This Note has been prepared by Counsel to the Bradley Lake Project Management Committee.
The purpose of the Note is to analyze the assets involved in the Proposed Transaction and
recommend a reasonable allocation of value of the components which comprise the Proposed
Transaction.
This Note is being developed since AEA has requested data/information that would provide it with
a better understanding regarding the relative values of the various components that are part of
the Proposed Transaction. After a look at valuation generally and the three principal approaches
to valuation, this Note will present the relative value of the components of the Proposed
Transaction.
OVERVIEW OF ANALYSIS
The following analysis includes estimates. The nature of the various components being valued:
some components are physical assets; some components have a relatively small current value
but are being leveraged for the greater good which should result in considerable long-term value;
some components involve hard cost easily identifiable; and another component is less finite
because of the type of benefit received require different sources of background information and
data. Moreover, the financial cost data available for the HEA assets must necessarily rely on
system-based costs. HEA maintains its books and records on a utility system basis; no data is
available for individual transmission lines.
The Proposed Transaction poses a different set of circumstances for the appraisal of value. There
are three types of assets where valuation methods work well (i.e., physical assets being
purchased, restoration costs are being paid, transmission capacity access being acquired) and
two types of assets that have very real value, but the value is less likely to be adequately captured
Page 2 of 7 - Valuation of Proposed Transaction
by traditional valuation methods (resolution of years long litigation and acquisition of a currently
inoperable transmission line).
VALUATION GENERALLY
The terms appraisal and valuation are often used interchangeably. The valuation of machinery,
equipment, and certain other business assets encompasses all of the following:
A. Determining the value of property.
B. Estimating the cost of a) producing new property; b) replacing existing property (by
purchase or production of an equivalent); or c) reproduction of an existing property by
purchase or production of an identical property.
C. Determining nonmonetary benefits or characteristics that contribute to value, i.e.,
rendering judgments as to age, remaining life, or quality.
D. Forecasting earning power.
The term fair market value is the estimated amount, expressed in terms of money, that may
reasonably be expected for a property in an exchange between a willing buyer and a willing seller,
with equity to both, neither under a compulsion to buy or sell, and both fully aware of all relevant
facts as of a specific date.
APPROACHES TO VALUE
There are three generally accepted approaches to value: cost, sales comparison, and income.
These approaches are widely accepted by financial institutions, courts, government agencies,
business, and society in general. These approaches also work to provide a systematic method to
determining value. These approaches and how the approach is considered in the following
analyses are:
Cost Approach (RCLD) – This approach, Replacement Cost Less Depreciation or RCLD,
starts with the current replacement cost of the property (i.e., new facilities) being estimated
and then a deduction is taken from that value for the loss in value caused by physical
deterioration, functional and/or economic obsolescence of the asset being valued. The
logic behind the cost approach is that a prudent buyer will not pay more for a property than
the cost of acquiring an equivalent substitute property.
A cost range of approximately $800 thousand to $1 million per mile can be used
to construct a new transmission line of similar in size and type in Alaska.
The cost associated physical deterioration is derived from HEA’s Annual Report
filed with the Regulatory Commission of Alaska using system-wide data.
Page 3 of 7 - Valuation of Proposed Transaction
Sales Comparison Approach – This approach considers the prices that have been paid
for assets comparable to the asset being valued, equating the comparable properties to
the subject. This approach often considers a premium paid over net book value (“NBV”).
Comparable sales takes the NBV of an asset and applies a multiplier of the
premium paid over NBV for similar type assets.
The multipliers are found from the review of many like transactions over time.
When there is a willing buyer and willing seller, it is common for the electric utility
industry to transfer electric utility assets for a price near a multiple of NBV
approximating 2 to 2.5.
The range of multiples vary widely when one of the participants is unwilling and
condemnation is employed (e.g., multiple ranging between 1.3 to 3.8 and above)
The NBV of the transmission lines is derived from HEA’s Annual Report filed with
the Regulatory Commission of Alaska using system-wide data.
In that HEA uses system-wide costs for depreciation, depreciation amounts for
individual lines must be derived by using the mileage of the line in comparison to
HEA’s total transmission system to obtain an estimate of NBV.
Income approach – Determine the present value of the future economic benefits of owning
the property.
The amount of income received for transmission services was calculated from
current cost-based rates and potential market rates.
This Note will identify all three methodologies where practicable and explain where such an
approach can and should not be considered.
THE PROPOSED TRANSACTION
The amount to be exchanged for the Proposed Transaction is $13,300,000.00. The Proposed
Transaction is comprised the following components:
1. Acquisition of transmission capacity rights in the Soldotna to Sterling Transmission Line
(subject to reservation for HEA’s native load requirements) (hereinafter referred to as “SS
Line”).
2. All of HEA’s property rights and obligations in the Sterling to Quartz Creek Transmission
Line (“SSQ Line”).
Page 4 of 7 - Valuation of Proposed Transaction
3. All of HEA’s property rights and obligations to 69kV Line (“69 kV Line”) .
4. An assignment of the permits granted to HEA (Permit E-48-KE and Permit E-47-KE) for
authorization to use and occupy certain lands of the Kenai National Wildlife Refuge, as
well as to support any upgrade to the line in the future.
5. Reimbursement of the costs incurred by HEA to restore the Sterling to Quartz Creek
Transmission Line (“Swan Lake Fire damages”).
6. Settlement of the ongoing litigation concerning Kenai Peninsula transmission issues
(“Litigation”).
Each of the principal components will be addressed individually by type, then the Proposed
Transaction will be addressed as a complete transaction
VALUATION - TRANSMISSION ASSETS
The following summary shows the results of some valuation methodologies that were examined
when the purchase of the HEA transmission facilities was being considered with respect to the
transmission-related physical assets.
1. Soldotna to Sterling Transmission Line (SS LINE) Transmission Capacity.
Recognizing that the transmission capacity that will be allocated on the SS Line has real
value (i.e., use of the capability of the transmission line). The reservation for native load
has no real effect on the current value because all transmission needs can be met for the
foreseeable future.
Comparable Sales Approach:
(NBV X 2.0 to 2.5 premium) = $120k X 2 = $240,000
Cost Approach (RCLD):
14.25 miles X $800k to $1 Million/mile = $11.4million to $14.3 million
less Depreciation = $ 1.6 million $ 1.6 million
Estimated Cost = $ 9.8 million to $12.7 million
Income Approach: $0.3 – 0.7 million annually
$0.3 - $0.7 million @ 3% for 20yrs. (14.878) = NPV of $4.5 million to $10.4 million
SS Line Capacity Valuation Summary – Given there is no transfer is being made of the
actual asset and HEA is reserving a 5 MW share above and beyond HEA’s Bradley Project
Capacity Percentage, a lower multiple of 2.0 is warranted under the Comparable Sales
Approach. However, the Comparable Sales Approach less applicable because of the use
of system costs and the length of the transmission line at issue. Moreover, there is value
in being able to mandate repairs and have the ability to upgrade the line in the future. The
Page 5 of 7 - Valuation of Proposed Transaction
Cost approach is useful because the users are effectively getting all the capacity they
need. The income approach is the most directly correlated because it is a sale of the use
transmission capability.
SS Line Capacity - Suggested value = $4.5 million.
2. Sterling to Quartz Creek Transmission Line (SSQ Line).
Recognizing that the entire transmission line asset will be transferred, there are a number
of methodologies which can be used obtain a representative “value” of the utility asset.
Comparable Sales Approach:
(NBV X 2.0 to 2.5 premium) = $3.2M X 2.0 to 2.5 = $6.4 million to $8.0 million
Cost Approach (RCLD):
39.9 miles X $800k to $1million = $31.9 million to $39.9 million
less Depreciation = $ 4.6 million $ 4.6 million
Estimated Cost = $27.3 million to $35.5 million
Income Approach: $0.3 – 0.7 million annually
$0.3 - $0.7 million @ 3% for 20yrs. (14.878) = NPV of $4.5 million to $10.4 million
SSQ Line Valuation Summary – The Comparable Sales Approach is the method most
directly correlated to this asset because the transmission line is being sold. Comparable
utility assets when sold have a premium paid above NBV of 2.0 to 2.5 premium. The Cost
Approach does show the value if the line needed to be built but we have an existing asset.
The Income Approach is least relevant because the line will be owned by users and
transmission service will be provided at cost.
It is of substantial value to all of utilities purchasing power from the Bradley Lake Project
that the resources of all utilities can be leveraged should another issue like the Swan Lake
Fire occur. When the Sterling to Quartz Creek Transmission Line was taken out of service,
all the utilities north of the Sterling to Quartz Creek Transmission Line (i.e., Chugach,
ML&P, MEA, GVEA and SES) were unable to access their Project Power, substantially
reducing the amount of water that could be used. Not having access to the Project Power
cost those utilities approximately $13.6 million in additional fuel/power expenses for the
123 days of the outage related to the Swan Lake Fire and an additional amount of $2.2
Million in the value of lost water. The ability to concentrate the resources of the entire
Railbelt (through the BPMC Member-Utilities) to assist in remedying any such issues in
the future is very important to the ability to reduce and/or eliminate such costs. These
intrinsic values call for a 2.5 + over NBV premium.
SSQ Line Purchase - Suggested Value = $8.0 million.
Page 6 of 7 - Valuation of Proposed Transaction
3. 69kV Line & Permits
The true value of the 69 kV Line is found with the right-of-way HEA has secured and
historically used for the transmission line. Utilizing the easements associated with the 69
kV line are a significant advantage for the plans to upgrade the transmission facilities
delivering energy from the Bradley Lake Project. It should be noted that acquiring a new
right-of-way in a national wildlife refuge requires an Act of the US Congress. Transferring
the existing rights-of-way associated with the 69 kV Line is considerably more preferable
than pursuing a new easement with Congress. While there is known value, the actual
quantification is understandably difficult.
Comparable Sales Approach: N/A; SSQ Line being acquired
Cost Approach (RCLD): N/A; SSQ Line being acquired
Income Approach: $0; inoperable (potential scrap value)
69 kV Valuation Summary – None of the traditional valuation methodologies apply to the
69 kV Line because the 69 kV Line is inoperable and is essentially being included in the
Proposed Transaction because the permits that govern a part of the 69 kV Line are used
and needed by the SSQ Line. The permits provide access to and through a Federal Lands.
It is my understanding that such permits are very difficult to obtain. In this case, it appears
that the permits can be transferred. The estimated costs to obtain similar permits if the 69
kV Line permits were not transferrable would require outside legal, environmental, and
engineering services. It is conservatively estimated that such efforts would cost at least
$500 thousand to $1 million.
69 kV Line – Suggested Value = $0.5 million
VALUATION – OTHER ASSETS
The purchase price includes other components which have value but do not necessarily lend
themselves to traditional asset valuation methodologies and analyses. The following components
fall into that category.
1. Cost Associated with Swan Lake Fire Damage
There is no asset being acquired; rather, costs were incurred by HEA to restore the SSQ
Line which the BPMC agreed to pay. Consequently, the Comparable Sales Approach and
the Income Approach are not applicable. The Cost Approach is most directly aligned with
the repayment of cost incurred. No depreciation and asset value need be reviewed. Actual
cost works fine.
HEA estimated that it incurred roughly $ 1 million in cost. The costs incurred for restoration
of the SQ Line following the Swan Lake Fire are reflected in the final purchase price of the
Proposed Transaction.
Actual Cost Associated with Swan Lake Fire = $1.0 million
Restoration of SSQ Line (Swan Lake Fire Damage) - Suggested Value = $1.0 million.
Page 7 of 7 - Valuation of Proposed Transaction
2. Settlement of Litigation
The Railbelt Utilities have been involved in litigation regarding Kenai Peninsula
Transmission matters for over four years. After Closing, all claims and litigation by and
between the various utilities are to be dismissed with prejudice as an integral component
and condition of this Proposed Transaction. The settlement is a component that
contributes considerable value to the Proposed Transaction, but which is very difficult to
specifically attribute a value. The resolution frees up considerable resources of the Railbelt
utilities that can be put to the best and highest use by each of the individual utilities
involved in the litigation. As a key component of the Proposed Transaction, the settlement
of the litigation provides significant value.
The various methods for valuing assets are not applicable to this component of the
Proposed Transaction. A review of potential savings can be substituted. It is my
understanding that, as a whole, the utilities involved in the litigation spent conservatively
roughly $500 thousand per year litigating the matters involved. This amount is anecdotal
but appears realistic. There is no actual data available. I believe that without this resolution
the litigation may have continued another two years.
Value of Ending Litigation = $500 thousand - $1 million
End Litigation – Suggested Value = $0.5 million
CONCLUSION ON VALUATION
The purchase price negotiated for consummating the Proposed Transaction appears to be well
in-line with the value a reasonable person would expend for the assets involved. While the value
of the individual components of the Proposed Transaction can be debated, there is no question
that the real, long-term value received by AEA from this transaction far exceeds the $13.3 million
cost. Indeed, the relative cost to build a comparable situation to the SSQ Line purchase and the
access to the transmission capacity of the SS Line would be in the range of $38 to $45 million.
This amount does not include the value of the other integral components.
Page 8 of 7 - Valuation of Proposed Transaction
A summary of the valuation of the individual components as recommended in this Note is as
follows:
SS Line Capacity - Suggested value = $ 4.5 million
SSQ Line Purchase - Suggested Value = $ 8.0 million
69 kV Line – Suggested Value = $ 0.5 million
Restoration of SSQ Line (Swan Lake Fire Damage) - Suggested Value = $ 1.0 million
End Litigation – Suggested Value = $ 0.5 million
Total Valuation = $ 14.5 million
These amounts are purposely conservative and thus, would be easily be found to be reasonable
and just. The value that can be gained by the planned upgrades to the transmission facilities that
serve Bradley Lake Hydroelectric Project is substantial but not reflected in the above amounts.
The value to be gained through future upgrades to the transmission lines at issue is not included
in this analysis.
Please do not hesitate to contact me should you have any questions or desire further information.
_________________________
813 West Northern Lights Boulevard, Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
MEMORANDUM
TO: Alaske Energy Authority BOARD
FROM: Curtis W. Thayer, Executive Director
DATE: October 16, 2020
RE Baxter Senior Living – Response to Board Questions
This memorandum is per your questions regarding Baxter Senior Living.
Baxter Senior Living, LLC received $924,152.83 in loan funds to purchase and install five
Yanmar natural gas-fired Combined Heat & Power (CHP) units which would produce heat
and electricity for Baxter Senior Living. The CHP units would reduce long-term operating
costs for the newly constructed 116-bed assisted living facility located at 4280 Baxter
Road, Anchorage, Alaska which began operations in October of 2019. The CHP system
would also provide redundancy to ensure that life support, elevators, and other critical
equipment do not lose power during future blackouts or natural disasters.
Baxter Senior Living, LLC is an independent Power Producer (IPP), and has completed all
steps to execute an interconnection agreement with Chugach Electric Association (CEA).
813 West Northern Lights Boulevard Anchorage, Alaska 99503 T 907.771.3000 Toll Free 888.300.8534 F 907.771.3044
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
Department of Energy
Building Technologies Proving Ground – Public Sector Field Validation
Grant Application
Executive Summary
Funding Source. The Office of Energy Efficiency and Renewable Energy (EERE), on behalf of the
Building Technologies Office (BTO), in cooperation with the State Energy Progran (SEP) released
a funding opportunity announcement that allowed state, local, and tribal governments to seek
funding to meet the Department of Energy (DOE) goals for high impact building technologies.
Project Objectives. The Alaska Energy Authority (AEA) and its partner the University of Alaska
Anchorage (UAA) is proposing to field-validate the energy efficiency of Combined Heat and
Power (CHP) technology being integrated into the ConocoPhillips Integrated Science Bulding
(CPISB). The intent is to measure and verify data, and provide education and training to support
utilization of CHP technology in cold-climate regions heavily affected by long-term climate
impacts. If successful, project will increase building energy efficiencies by reducing energy use
and greenhouse gases. Another benefit is that this technology will increase resilience and
provide redundancy to buildings’ electrical and heating systems.
Potential Impact. Energy costs have been increasing in Anchorage due to deferral of renewal
and replacement projects. UAA infrastructure has surpassed its useful life. Arctic locations can
benefit from utilization of this technology and overall reductions in greenhouse gas emissions.
The potential of this technology across the nation is 387 TBtu per year in energy savings. In spite
of this, CHP technology, though relatively mature, has not been widely proven and therefore
industry practitioners will benefit from this project through sharing data. This project can
leverage data and increase technologies use. UAA, as an open access institution, is uniquely
positioned to collaborate, research, create, and disseminate the knowledge gained through this
project. This fact, directly tied to the UAA mission, creates the best possible impact by broader
utilization of this technology.
Major Participants. AEA is the prime grant recipient and will issue a sub award to UAA for the
execution of the grant objectives. UAA will lead the project and be supported by departments
within the University structure. Facilities and Campus Services, and the College of Engineering
and along with the Institute of Circumpolar Health, will be key participants. AMC Engineers is a
consultant hired to design and provide project support.
Budget. UAA will provide the required 30 percent match for this project. Total request is $1
million Deparatment of Energy and $428,600 match. The grant is expected to last three years.
AEA will enter into a reimbursable services agreement with UAA.
Alaska Energy Authority Page 1 of
Alaska Cargo and Cold Storage Project
Fact Sheet
Project Overview
The project, known as Alaska Cargo and
Cold Storage (ACCS), is a business
partnership with AEA, Alaska-based
McKinley Capital Management, LLC and
Rocky Mountain Resources. The partnership,
will construct a cargo storage, warehouse
facility at the Ted Stevens Anchorage
International Airport (ANC). This facility will
be a state-of-the-art building that is
exceptionally energy efficient. It will
maximize use of available renewable and
energy efficient technologies.
The building will house administrative
offices, temporary storage, and a climate-
controlled warehouse capacity. This project
has cleared ANC’s public process and has an
Advance Limited Right of Entry to complete
geotechnical drilling and soil contamination
testing. ACCS and ANC are currently
negotiating a 55-year lease agreement with
projected lease completion by early summer
2020. ACCS will be the first cargo transfer
and cold storage facility developed at ANC
that will be utilizable by ANC’s high volume
major air cargo carriers, which are
individually able to support the
development of their own similar cargo
facility. While FedEx and UPS operate cargo
facilities for their exclusive use at ANC, UPS,
and FedEx combined account for only 22
percent of air cargo flown into Anchorage.
Phase 1
AEA has been awarded a $21 million Better
Utilizing Investments to Leverage
Development (BUILD) grant to complete the
$87.9 million Phase I of the ACCS facility, a
state-of-the-art, ~190,000 square foot high-
efficiency cold storage and climate-
controlled air cargo transfer facility. This
project will be the first phase of a ~715,000-
square-foot cargo transfer facility.
Groundbreaking will likely occur in winter/
spring 2021. The facility will begin
operations by the summer of 2022.
Phase 2
As a follow-on to Phase I, ACCS plans that
Phase II will include up to 525,000 additional
square feet of quick cargo transfer space
and longer period air cargo storage. Wide-
body aircraft parking may be added to the
project during Phase II if final building
configuration and FAA line of sight
requirements are met.
In total, $21 million of BUILD Funds will help
catalyze the development of a ~$220
million facility that will be the cornerstone
for ANC’s transformation to a global
logistics hub.
Alaska Energy Authority Page 2 of 2
Project Objective
The project’s objective is to transform an
optimally situated site at ANC into an
energy-efficient and technologically-
advanced cold storage and cargo transfer
facility. By partnering with the AEA for
BUILD funding, ACCS will significantly
reduce development costs and benefit also
from AEA’s expertise as it incorporates best-
in-class energy efficiency in its facility.
Project Benefits
Jobs and Spending – Construction during
Phase I will generate 830 jobs producing
$56.9 million in labor income and $147.6
million in total Alaska expenditures. Phase II
is projected to generate an additional 1,245
jobs, $75.6 million in labor income, and
$220.5 million in total Alaska expenditures.
ACCS operations are expected to generate
115 permanent jobs and $9.1 million in total
labor income following the completion of
Phase I; Phase II operations are expected to
generate an additional 190 jobs and $15.5
million in total labor income.
Improved Efficiency for Air Cargo
Carriers Utilizing ANC – ACCS will enable
the transfer of goods and equipment
between planes transported through ANC,
thereby improving the efficiency of
international and domestic cargo shipments.
Alaska Food Security – Limited availability
of cold storage has made Alaska vulnerable
to supply chain disruptions. ACCS will
improve Alaska’s food security and reduce
dependency on WA-based cold storages.
ANC Competitive Location – ACCS will
provide ANC with a highly marketable
facility that will allow air cargo operators to
take advantage of ANC’s polar route
location for time and fuel cost savings as
well as a transfer point for southern delivery
points.
Value-Added Manufacturing – Alaska is
the largest seafood producer in the nation,
harvesting more seafood than all other
states combined. In the 2017 and 2018
period, annual Alaska seafood harvests of
approximately 2.5 million tons were worth
$4.7 billion after processing. The
opportunity exists for more of the state’s
seafood processors to store seafood in
Anchorage rather than WA. The proposed
cold storage facility in Anchorage is
favorably positioned to store seafood and
value-added product from all over the state,
and store it securely before delivering
product to air carriers serving domestic and
international markets.
Total Investment
ACCS and financial partners will contribute
and/or secure $62.9 million in funding for
Phase I of ACCS. This represents 71.5
percent of total project costs. BUILD
Funding will provide $21 million; this
represents 28.5 percent of total project
costs.
Permitting
The Municipality of Anchorage, State, and
Federal approvals are already in progress
and must be obtained before
commencement of final engineering. An
appropriate construction permits will also
be necessary before commencing
construction.
Board of Directors Memorandum
AEA Involvement in implementation of
ALASKA COMMERCIAL PROPERTY ASSESSED CLEAN ENERGY PROGRAM
In August of 2017 the Alaska Legislature established the ALASKA C-PACE program.
The program allows local governments to adopt and establish C-PACE Programs. The Governor and AA
convene a group of interested Alaskan’s and outside the state experts familiar with C-Pace programs in
other states and began a process that would develop forms, and educate local government officials on
how they might implement a C-PACE program in their jurisdictions.
To date AEA as the state’s lead agency involved with C-PACE has worked closely with a statewide
advisory group. It also engaged a national firm universally regarded as the best C-Pace consultant on
program implementation, participated actively in the crafting of documents and a program handbook
and assisted the Municipality of Anchorage as it worked towards the adoption of a C-Pace program.
On September 15th of this year the Anchorage Municipal Assembly took its first formal step towards
implementing the law and the program in the state. It adopted a Resolution of Intent finding that
adoption of the program in the municipality was in the public Interest.
On October 13th a package of program ordinances will come before the body with the mayor’s
recommendation for adoption. It is anticipated that the ordinance will be formally enrolled, that
information will be provided and that the Assembly will ask for the matter to be brought before them at
a work session. That work session will likely occur on October 21. The hope expressed by the Mayors
senior advisors is that the implementing ordinance will then be brought before the assembly for
adoption at its next regular meeting.
Copies of the AEA sponsored Handbook including formal legal documents and the Municipalities draft
ordinances can be made available to you on request or if you prefer to review the documents on line a
link can be provided.
The Alaska C-Pace Website where certain materials are presently available for review is:
www.akcpace.com
The City of Juneau and both the City of Fairbanks and the Fairbanks North Star Borough have also
expressed interest in adopting the C-Pace program. AEA Staff will actively engage with these
governments once the Municipality of Anchorage C-Pace effort is concluded.
AEA Rural Projects Highlights
Newtok
September 2020, Newtok was able to restore power after a month long outage. In 2019
AEA transferred a genset and switchgear to the community to stabilize them until the
larger larger ANTHC project to relocate the community to Mertarvik was completed. As
a condition of the transfer the community had to have a contact to have the equipment
installed as part of the relocation project. AEA had no further obligation to the project.
In August of 2020 news of Newtoks power outage was received. It turns out that the
AEA supplied equipment had never been installed by the community’s contractor. AEA
provided coordination and technical assistance to assist the contractor in restoring the
power.
Gambell
Barge Header Project – New barge fill headers were installed under a Denali
Commission funded project. This allows the community of Gambell to be resupplied by
barge rather than by plane. The result is a fuel cost savings of about 50%.
Tuluksak
Bulk Fuel Upgrade – The Tuluksak Native Corporation purchase two new bulk fuel
dispensing tanks. AEA provided engineering and technical support. With our support,
they were able to get a conditional approval from the State Fire Marshall to fill the
tanks. These ‘new’ tanks will replace the existing dispensing tanks which are not safe to
be used. The Native Corporation has hired a contractor to assist them with installing the
necessary tank appurtenances. AEA will provide additional technical support and
regulatory documents to meet the conditions set forth by the State Fire Marshall.
RPSU Inventory and Assessment
Update the Inventory and Assessment project, which we demonstarted at the last board
meeting, is about 50% complete.
AEA Active Rural Projects
$20,407,022
$24,373,751
$4,718,857
$3,113,898
Active Projects Total Budgeted
BFU RPSU Training Circuit Rider
15
52
8
85
Total Active Projects
BFU RPSU Training Circuit Rider
Award No Project Name DC Funding Perf. Period Beg Perf. Period Thru Actions Since Last Report
Estimated Jobs
Created
01349-09 RPSU - Togiak-Twin Hills Intertie 4,187,221 2/15/2011 9/30/2021 None 26
01432-09 BFU - Tatitlek 1,472,000 6/1/2013 12/31/2021 None 30
01473-06 RPSU - Clark's Point 2,819,700 6/16/2015 6/30/2020 In Close-out 26
01474-07 BFU - Chalkytsik 517,500 6/16/2015 12/31/2021 None 30
01485-04 START Communities Tech Asst 375,000 11/1/2015 6/30/2022 None 2
01492-08 BFU - Beaver 608,000 7/6/2016 12/31/2021 None 5
01500-06 Bulk Fuel Operator Training 1,010,000 9/1/2016 12/31/2021 None 3
01515-07 Circuit Rider Program 900,000 1/1/2017 12/31/2021 None 3
01516-07 RPSU - Maintenance & Improvement 748,776 10/1/2016 12/31/2022 None 20
01523-06 Miscellaneious Small M&I Projects 870,000 6/1/2017 12/31/2021 None 20
01524-03 RPSU - Port Heiden 1,250,000 7/1/2017 6/30/2020 In Close-out 30
01525-05 Power Plant Operator Training 647,514 8/15/2017 9/30/2021 None 3
01544-03 Itinerant Utility Training 500,000 3/1/2018 6/30/2021 None 3
01548-06 RPSU M&I - Statewide 2,550,000 5/1/2018 12/31/2021 None 20
01549-04 RPSU Inventory & Assessment - Statewide 300,000 4/18/2018 12/31/2021 None 20
01550-03 RPSU - Akhiok 1,500,000 5/1/2018 9/30/2021 None 26
01551-04 RPSU - Venetie 250,000 5/1/2018 12/31/2020 None 5
01557-02 Barge Headers and Fill Lines 3,976,820 10/1/2018 12/31/2022 None 60
01571-01 BFU - Nunapitchuk 1,852,546 8/15/2019 12/31/2022 None 30
01573-01 BFO In Community Training 40,000 8/15/2019 12/31/2020 None 2
01574-01 RPSU - Nikolai 351,050 8/1/2019 6/30/2021 None 5
01575-02 RPSU - Nelson Lagoon 135,455 8/1/2019 6/30/2021 None 5
01576-01 RPSU - Rampart 351,050 8/1/2019 6/30/2021 None 5
01577-03 RPSU - Napaskiak 335,455 8/1/2019 12/31/2021 Date Extended / Funds Added 26
01592-00 BFU - Scammon Bay 300,000 2/17/2020 3/31/2021 None 5
01600-00 VEEP - Statewide 500,000 6/15/2020 12/31/2021 None 3
01610-00 BFU - Ekwok 100,000 9/1/2020 6/30/2021 New Award 30
01611-00 Engineering Library 100,000 9/1/2020 6/30/2022 New Award 1
01618-00 Fivemile Creek Hydroelectric Project 2,880,000 9/1/2020 12/31/2022 New Award 65
Total Funding for Active DC Awards:31,428,087
Less Total Spending on Active DC Awards:(12,197,462)
Total Funding Remaining on Active DC Awards:19,230,625
Active Denali Commission Awards
As of 10/09/2020
Board Memorandum
Renewable Energy Grant Fund Program
On September 28 AEA received 21 submittals seeking grants of varying amounts for renewable energy
projects. Attachment One to this memorandum identifies all grant applications received.
In the processing of the applications there are stages of review. Stage One requires a determination of
completeness, project and applicant eligibility, and timely submittal. If an application does not pass a
Stage One review the applicant is notified. The applicant can appeal the determination but if no appeal
is taken or if an appeal is not granted the application is eliminated from further consideration.
As Attachment One indicates, three applications were untimely. At the time of preparation of this
memo two applicants have appealed Stage One denials. Decisions on those appeals will be made by
AEA’s Executive Director of AEA after relevant materials are presented to him by the Reconsideration
Coordinator.
An application for the Pilgrim Hot Springs Geothermal project (13009) has previously received funding
and is at most eligible for $54,000 if it is selected for an award of funds during this round of
consideration for grants. The applicant has asked to remain under consideration and will be scored.
The application by The University of Alaska (13012) for support in connection with a geothermal project
was voluntarily withdrawn.
Attachment Two identifies the Applications that have successfully passed through a Stage One review
and indicates the persons and firms responsible for further evaluation.
The Renewable Energy Fund presently has a balance of $5,921,450 to distribute. The final decisions on
how much and to which applications funds will be awarded will be made by the legislature after
considering recommendations by AEA and the Renewable Energy Fund Advisory Committee.
Attachment Three is a timeline for further processing of the applications received and advancing
towards award of funds.
The Renewable Energy Grand Fund program will sunset on June 30, 2023 unless it is reauthorized by the
legislature.
This year’s submittals still under active consideration collectively seek $10,853,351. The projects for
which funding is sought include seven hydroelectric projects, four wind projects, three energy storage,
one solar energy, one geothermal energy, one for heat recovery, and another for heat from biomass.
With all projects in various stages of development some seek funding for feasibility analysis, some for
project design, some for construction and some for two stages of a project. The largest amount sought
is $2M sought for both feasibility and design of a hydroelectric project. The smallest request is for
$98,000 for harnessing wind energy
At the present time the applications for grant funding are under study by the Alaska Department of
Natural Resources, contracted independent economists, and AEA technical and subject matter experts.
All reviews are to be completed on or before December 18, 2020.
INITIAL RECEIPT 2020 Renewable Energy Fund Round 13 Applications
App
Number Applicant Name Project Title Date
Received:
Time
Received
#
Copies
CD or
THUMB
DRIVE
Shipping Method Verified at Opening by:
13001
Nushagak Electric & Telephone
Cooperative
Nuyakuk River Hydroelectric Project
(Run of River Project)9/25/2020 3:31pm 1 Thumb Hand Delivered/Email KTS
13002 AVEC Goodnews Bay Wind Feasibility 9/28/2020 11:07am 1 Email KTS
13003 AVEC Kotlik Wind Feasibility 9/28/2020 11:11am 1 Email KTS
13004 University of Alaska Anchorage
Building Integrated Technologies
Potential in Alaska 9/28/2020 11:17am 1 Email KTS
13005 Naknek Electric Association, Inc.
Naknek Service Area Wind and Solar
Power Feasibility and Conceptual
Design 9/28/2020 12:02pm 1 Email KTS
13006 Alaska Gateway School District
Walter Northway School Wood Chip
Heating System 9/28/2020 12:12pm 1 Email KTS
13007
City of Unalaska Department of
Public Utilities
City of Unalaska Wind Power Feasibility
and Final Design 9/28/2020 1:45pm 1 Email KTS
13008 City of Chignik Chignik Hydroelectric Dam Project 9/28/2020 1:57pm 1 Email KTS
13009 Kawerak, Inc.
Pilgrim Hot Springs Geothermal Power
Plant Conceptual Design 9/28/2020 3:04pm 1 Email KTS
13010 Inside Passage Electric Cooperative
Water Supply Creek Hydro Final Design
- Hoonah, AK 9/28/2020 3:24pm 1 Email KTS
13011 City of Shungnak Shungnak Heat Recovery Expansion 9/28/2020 3:20pm 1 Email KTS
13012 University of Alaska Fairbanks
Engineering Alaska's Geothermal
Energy- HSBV, Akutan 9/28/2020 3:50pm 1 Email KTS
13013 Cordova Electric Cooperative, Inc.Cordova Hydro Storage Assessment 9/28/2020 3:57pm 1 Email KTS
13014 Puvurnaq Power Company
Improved airfoil for wind turbines in
Kongiganak 9/28/2020 4:00pm 1 Email KTS
13015 Burro Creek LLC Burro Creek Hydro Project 9/28/2020 3:45pm 1 CD Hand Delivered KTS
13016
Community of Elfin Cove Non-Profit
Corporation, Elfin Cove Utility
Commission
Elfin Cove Hydro Final Permitting and
Design 9/28/2020 3:45pm 1 CD Hand Delivered KTS
13017 Pedro Bay Village Knutson Creek Hydro Project 9/28/2020 3:45pm 1 CD Hand Delivered KTS
13018 Kotzebue Electric Association, Inc.
Kotzebue Community-Scale Energy
Storage System 9/28/2020 4:00pm 1 Email KTS
13019 City of Nenana Nenana Biomass And Washeteria 9/28/2020 4:30pm 1 Email KTS
13020 Akiachak Ltd & Subsidiaries Akiachak Reconnaissance Study 10/1/2020 10:57am 1 Printed Copy Hand Delivered KTS
13021 City of Port Heiden Port Heiden Reconnaissance Study 10/1/2020 10:57am 1 Printed Copy Hand Delivered KTS
21 TOTAL OF APPS
RECEIVED, begin with 13001
1 of 1 10/15/2020 1:55 PM
AEA LOAN DASHBOARD REPORT
AEA POWER PROJECT LOAN FUND
YEAR TO DATE
07/01/2020 LOAN ACTIVITY EARNINGS
START DATE LOAN CATEGORY STARTING
BALANCE
FUNDS
DISBURSED
PAYMENTS
RECEIVED
ENDING
BALANCE
INTEREST
RECEIVED
LATE FEES
RECEIVED
INTEREST +
LATE FEES
21 AEA POWER PROJECT FUND LOANS 27,560,262 364,846 (51,325) 27,873,783 59,139 1,468 60,607
TOTAL # OF PPF LOANS
1 LOAN PROGRAM SUMMARY
# OF DELINQUENT PPF
LOANS Outstanding Loans per Trial Balance 27,873,783.25$
2,358.44$ Uncommitted Cash Balance 10,162,327.61$
LOANS DELINQUENT
AMOUNT ($)Loan Commitments 598,445.23$
0.008%Total Loan Program 38,634,556.09$
% OF DELINQUENT
LOANS TO PORTFOLIO
BALANCE
09/30/2020
END DATE
FISCAL YEAR-TO-DATE LOAN PORTFOLIO ACTIVITY (07/01/2020 - 09/30/2020 )
Waterfall Creek Hydro - King Cove, Alaska
Print Date: 10/23/2020
Page 1 of 2
AEA POWER PROJECT FUND LOANS BY ENERGY REGION & PROJECT TYPE
OUTSTANDING BALANCES & NEW ACTIVITY
ENERGY REGION AEA PPF LOAN
BALANCE
REMAINING
LOAN
COMMITMENTS
NEW
APPLICATIONS
IN PROCESS
# OF AEA PPF
LOANS TOTAL
ALEUTIANS 2,552,026 - 65,000 4 2,617,026
BERING STRAITS - - - - -
BRISTOL BAY 456,312 - 514,500 2 970,812
COPPER RIVER/
CHUGACH - - - - -
KODIAK 47,091 - - 2 47,091
LOWER YUKON-
KUSKOKWIM 346,665 - - 2 346,665
NORTH SLOPE - - - - -
NORTHWEST ARCTIC - - - - -
RAILBELT 4,086,401 - - 3 4,086,401
SOUTHEAST 20,193,287 546,287 - 3 20,739,574
27893070.2 YUKON-KOYUKUK/
UPPER TANANA 192,001 52,158 4,083,114 5 4,327,273 10422145.37
58569.36 27,873,783 598,445 4,662,614 21 33,134,842 TOTAL
BIOMASS
$102,869
CONSERVATION
$9,092DIESEL
$944,267
HYDRO
$24,592,941
SOLAR
$793,226
TRANSMISSION
$1,824,285
TANK FARM
$2,258,829
WIND
$2,609,333
AEA PPF LOANS BY PROJECT TYPE -NEW & OUTSTANDING BALANCE
BIOMASS
1
CONSERVATION
1
DIESEL
5
HYDRO
7
SOLAR
1
TRANSMISSION
1
TANK FARM
1
WIND
4
AEA PPF LOANS BY PROJECT TYPE
Print Date: 10/23/2020
Page 2 of 2
813 W Northern Lights Blvd., Anchorage, AK 99503 Phone: (907) 771-3000 Fax: (907) 771-3044 Email: info@akenergyauthority.org
REDUCING THE COST OF ENERGY IN ALASKA AKENERGYAUTHORITY.ORG
RGYAUTHORITY.ORG
2019/2020 AEA Community Outreach Schedule
Last modified on October 16, 2020
# STATUS DATE ORGANIZATION AEA STAFF
1. Upcoming To Be Determined, 2020 Bethel Chamber of Commerce Curtis W. Thayer
2. Upcoming To Be Determined, 2020 Greater Palmer Chamber of Commerce Curtis W. Thayer
3. Past October 6, 2020 FY22 Budget Development Presentation to Governor Curtis W. Thayer
4. Past October 1, 2020 FY22 Budget Development Presentation to Office of Management & Budget Curtis W. Thayer
5. Past September 23, 2020 2020 Virtual Southeast Conference Annual Meeting: Energy Committee Curtis W. Thayer
6. Past September 2, 2020 Congressman Don Young Visits AIDEA & AEA Office Curtis W. Thayer
7. Past August 31, 2020 Lower Kuskokwim 2020 Vitural Power Pledge Challenge Taylor Asher
8. Past July 28, 2020 Fairbanks Economic Development Corporation: Energy for All Alaska Task Force Curtis W. Thayer
9. Past July 22, 2020 Fairbanks Chamber’s Energy, Environment & Natural Resources Committee Kirk H. Warren
10. Past June 12, 2020 Commonwealth North’s Energy Action Coalition Curtis W. Thayer
11. Past June 11, 2020 (Postponed*) Seward Chamber of Commerce Curtis W. Thayer
12. Past May 6, 2020 (Postponed*) Kenai/Soldotna Chamber of Commerce Curtis W. Thayer
13. Past April, 21, 2020 (Postponed*) Homer Chamber of Commerce Curtis W. Thayer
14. Past March 10, 2020 Greater Fairbanks Chamber of Commerce Curtis W. Thayer
15. Past February 20, 2020 Greater Wasilla Chamber of Commerce Curtis W. Thayer
16. Past February, 11, 2020 Community & Regional Affairs Committee Curtis W. Thayer
17. Past February 10-14, 2020 Alaska Forum on the Environment AEA Team:
17a. Past - Welcome Remarks during Keynote Event: Alaska Beyond Oil Panel T.W. Patch
17b. Past - Renewable Energy & Rural Alaska Powerhouse Panel Bill Price
17c. Past - Bulk Fuel Tank Farm Updates: Construction, Training, & Regulations Panel Bill Price
*These presentations’ date/time have been postponed due to COVID-19 until a later date/time can be determined.
Alaska Energy Authority Page 2 of 2
# STATUS DATE ORGANIZATION AEA STAFF
17 Past February 10-14, 2020 Alaska Forum on the Environment continued… AEA Team:
17d. Past - The Shines in Alaska: Solar Power Projects on the Railbelt Panel Tom Benkert
17e. Past - Harvesting Energy from Wood & Waste: Biomass & Landfill Gas Fuels in Alaska Panel Taylor Asher
17f. Past - Electric Vehicles Panel Betsy McGregor
17g. Past - Solar Power in Rural Alaska Panel David Lockard
17h. Past - The Low-Hanging Fruit of Energy Savings Panel Rob Jordan
17i. Past - New Hydropower Energy for Alaska Panel Bryan Carey
17j. Past - Rooftop Solar in your Alaskan Community Tom Benkert
17k. Past - Capturing the Wind Across Alaska: Large Scale Wind Projects Panel Kirk H. Warren
17l. Past - Clean Energy Financing Panel Tom Benkert
18. Past February 5-7, 2020 National Association of State Energy Officials Curtis W. Thayer
19. Past February 4, 2020 Southeast Conference Mid-Session Summit Curtis W. Thayer
20. Past January 30, 2020 Senate Community & Regional Affairs Committee Curtis W. Thayer
21. Past January 30, 2020 House Subcommittee Curtis W. Thayer
22. Past January 29, 2020 Senate Special Committee on the Railbelt Electric System Curtis W. Thayer
23. Past January 29, 2020 Alaska Power Association’s Legislative Conference Curtis W. Thayer
24. Past January 10, 2020 Commonwealth North’s Energy Action Coalition Curtis W. Thayer
25. Past December 18, 2019 Chugiak-Eagle River Chamber of Commerce Curtis W. Thayer
26. Past December 9, 2019 Anchorage Chamber of Commerce Curtis W. Thayer
27. Past December 5, 2019 BIA Tribal Providers Conference Curtis W. Thayer
28. Past November 21, 2019 Alaska Municipal League Annual Conference Jeff Williams
29. Past November 18, 2019 Alaska Municipal League Annual Conference Tom Benkert
AlaskaRemote Areas of
Affordable and Reliable Options for
Meeting Energy Needs and Reducing Emissions
A Report to Congress as Directed by the
Alaska Remote Generator Reliability and Protection Act
Prepared by the U.S. Environmental Protection Agency
in Consultation with the U.S. Department of Energy
September 2020
Acknowledgements
This report was made possible thanks to the input and review provided by the following: John
Ashley and Melanie King, U.S. Environmental Protection Agency, Office of Air and Radiation;
Lucita Valiere, Geoffrey Glass, Dave Bray, and Kelly McFadden, U.S. Environmental Protection
Agency, Region 10; Sherry Stout, U.S. Department of Energy, National Renewable Energy Laboratory;
Lizana Pierce, U.S. Department of Energy, Office of Indian Energy; Jennifer DeCesaro and Aaron
Ng, U.S. Department of Energy, Office of Energy Efficiency and Renewable Energy; David Lockard
and Taylor Asher, Alaska Energy Authority; Steve Stassel, Gray Stassel Engineering; Nathan Wiltse,
Bruno Grunau, and Jack Hebert, Cold Climate Housing Research Center; David Messier, Tanana Chiefs
Conference; Thomas Wolf, Denali Commission; Jim Plosay, Alaska Department of Environmental
Conservation; and Brian Hirsch, Deerstone Consulting.
ii
Cover and Acknowledgements page photos courtesy of John Pavitt, U.S. EPA Region 10,
Alaska Operations Office
More than 190 communities in remote
areas of Alaska are scattered over
long distances and are not connected to
population centers by road and/or power grid.
For purposes of this report, remote areas are
generally those areas that are not accessible by
the Federal Aid Highway System (FAHS), or
whose only connection to the FAHS is through
the Alaska Marine Highway System. Remote
areas also include those that are connected to
1
Introduction
The Alaska Remote Generator Reliability
and Protection Act, Public Law
116–62 (October 4, 2019), requires the U.S.
Environmental Protection Agency (EPA) to
submit a report assessing options for the federal
government to assist remote areas of Alaska
with meeting the energy needs of those areas
in an affordable and reliable manner using
existing emissions control technology or other
technology that achieves similar emissions
reductions. This report fulfills that mandate. In
this report, an overview of energy generation
in remote areas of Alaska and potential energy-
saving and emission control measures is
provided. Those measures include replacement
of older diesel generators with lower-emitting
generators, fuel switching, add-on emission
controls for diesel generators, installation
of renewable energy generation, energy
efficiency, new electric transmission interties,
and community collaboration. This report
also provides a discussion of ways that the
federal government can assist in implementing
those measures. Several federal government
programs already provide assistance, including
programs overseen by EPA, U.S. Department
of Energy (DOE), Denali Commission, U.S.
Department of Agriculture (USDA), and
the U.S. Department of the Interior, Bureau
of Indian Affairs (BIA). Continued support
of those programs likely provides the best
pathway for assisting the remote areas of
Alaska. This report is submitted in consultation
with the DOE, as required by the Alaska
Remote Generator Reliability and Protection
Act.
Energy Needs and Generation in Remote Areas
In Summary
These resources facilitate the production
of affordable and reliable electricity in
remote areas of Alaska while also
promoting the reduction of emissions:
Measures
• Diesel generator replacement
• Fuel switching
• Add-on emission controls
• Renewables
• Energy efficiency
• New electric transmission interties
• Community collaboration
Agencies and Programs
• EPA: Diesel Emissions Reduction Act
Grants
• DOE: Office of Indian Energy,
Tribal Energy Loan Guarantee Program,
Weatherization and Intergovernmental
Programs Office, Grid Modernization
Laboratory Consortium - Alaska Microgrid
Partnership
• USDA: Rural Energy for America
Program, High Energy Cost Grant
• BIA: Energy and Mineral Development
Program Grant, Tribal Energy
Development Capacity Grant
• Denali Commission
the FAHS but have an isolated grid that is not
connected to the statewide Alaska Railbelt
Grid, which runs from Fairbanks through
Anchorage and the Kenai Peninsula. A map of
Alaska showing the FAHS and Railbelt Grid
as of 2012 is shown in Figure 1. According
to data from the Alaska Department of Labor
and Workforce Development Research and
Analysis Section, the population size of remote
communities varies between seven and 8,100,
with 75 percent of communities having a
population of less than 500.1
Many of the communities in these areas are
in severe sub-arctic and arctic environments.
The U.S. Energy Information Administration
(EIA) reports that while Alaska’s total energy
consumption is among the 10th lowest by
state, its per capita consumption of energy
is the fourth highest, due in part to its harsh
winters.2 The communities in remote areas
typically face higher energy costs as compared
to the rest of the United States. According to
the EIA, prices for retail electricity in remote
areas of Alaska can be 3 to 5 times higher than
rates in urban areas.3 Remote areas of Alaska
correspond roughly to the communities that
are eligible for the Power Cost Equalization
(PCE) Program, a state-run program which
reduces the cost of electricity for eligible
customers in rural Alaska. PCE serves 83,000
residents in 194 communities.4 The power
generation ownership in remote communities
is usually either tribal, municipal, electric
cooperative, or investor-owned utility. Most
utilities are nonprofits. Many power plants are
not continuously staffed, and operators have
minimal technical training.
The communities in remote areas primarily
rely on generators powered by diesel engines.
According to the Alaska Energy Authority’s
(AEA) fiscal year (FY) 2019 Power Cost
Equalization report, 79 percent of kilowatt-
hours (kWh) in rural Alaska are generated with
diesel.5 Only two communities use generators
powered by natural gas. In 2010, a statewide
energy policy was enacted setting a goal for
50 percent of Alaska’s electricity to come
from renewable sources by 2025.6 Renewable
Figure 1: Alaska’s Federal Aid Highway System (FAHS) and Railbelt Grid (2012).
2
This section discusses available emission
control and pollution prevention
technologies that could be deployed in remote
areas of Alaska. If available, information on
the availability and cost of the technologies is
provided, as well as the expected emissions
reductions that can be achieved. As discussed
in this section, many of these technologies
already have a history of being successfully
installed in Alaska, in some cases through the
funding mechanisms described in the next
section.
Replacement of Older Diesel
Generators with New Tier 3
Diesel Generators
One option to reduce emissions that is
already in use is the replacement of older
diesel generators with generators powered by
newer, lower emitting engines certified to meet
“Tier 3” emission standards required for new
stationary diesel engines.7 Improvements in
engine design, such as high-pressure common
rail fuel injection, electronic governors, exhaust
energy resources that have been deployed in
remote areas include hydroelectric, wind, solar,
and geothermal. Many of the best opportunities
for renewable energy projects in remote areas
of Alaska were developed after 2008 with
grants from the Renewable Energy Fund, which
was created and administered by the AEA.
The AEA is the statewide energy office
and has a mission of reducing the cost of
energy in Alaska. It also has a long history
of constructing bulk fuel tank farms and
powerhouses in remote areas of Alaska.
Many of the AEA’s powerhouse design
innovations, such as using marine manifolds
to increase output from heat recovery systems,
have provided benefits in terms of reduced
fuel use and emissions. In recent years, the
AEA has assisted numerous rural villages in
obtaining EPA Diesel Emissions Reduction Act
(DERA) funds to replace older, less-efficient,
and high-emission diesel engines in rural
powerhouses with cleaner new engines. The
AEA is involved in Alaska energy issues that
range from potential nuclear development to
biomass boilers for space heating and power
generation. It owns the largest hydropower
project in Alaska, Bradley Lake Hydro, as well
as the Alaska Intertie, a 170-mile transmission
line that transmits power from the southcentral
region to Fairbanks.
Photos courtesy of Dave Messier, Rural Energy Coordinator for
Tanana Chiefs Conference
Before (top) and after (bottom) of the Chalkyitsik Power
Plant Tribal DERA generator replacement project. The two
new generators are painted white.
3
Emission Control Technologies and
Pollution Prevention Alternatives
FOR IMMEDIATE RELEASE
September 14, 2020
Alaska Delegation Welcomes $21 Million BUILD Grant for Anchorage International Airport
WASHINGTON, D.C. – U.S. Senators Lisa Murkowski and Dan Sullivan, and Congressman Don Young (all R -
Alaska) today thanked Secretary of Transportation Elaine Chao for awarding a $21 million Better Utilizing
Investment to Leverage Development (BUILD) grant to the Alaska Energy Authority to construct a 190,000 square
foot climate-controlled cold storage facility at Ted Stevens Anchorage International Airport (TSAIA). The Alaska
congressional delegation wrote a letter to Secretary Chao in May advocating for TSAIA to receive the BUILD grant.
“As a member of the Senate Appropriations Committee, I’ve worked hard to secure funding to support the BUILD
Grants program. The positive impacts it has had on Alaska over the years are significant. I join the rest of the Alaska
Delegation in applauding today’s announcement and thank Secretary Chao for investing in the future of our state,”
said Senator Murkowski. “This new transfer facility will improve shipping capabilities, strengthen Alaska’s supply
chain security, and provide much-needed jobs for Alaskans. With Ted Stevens Anchorage International Airport
having recently been recorded among the busiest in the world —this news could not be more timely.”
“The COVID-19 pandemic has shown us just how important it is for our country to have secure and reliab le supply
chains, and Ted Stevens Anchorage International Airport has served as an indispensable link in these global chains
for decades,” said Senator Sullivan. “To better meet the needs of our nation and the expected demands of global
commerce, this critical piece of infrastructure is due for a dramatic expansion in storage capacity, particularly the
ability to store cold freight during all seasons. I thank Secretary Chao and the Transportation Department for
recognizing the benefits of having TSAIA serve as more than a ‘gas and go’ hub, which will help us better secure
America’s distribution networks and grow jobs and economic opportunities for Alaskans.”
“I am very pleased to report that the Department of Transportation is making critical investments i n the State of
Alaska,” said Congressman Young. “Our state is geographically unique, and Alaskans know how important it is to
ensure that temperature-sensitive goods, foods, and other items can safely and effectively make their way to Alaska
and our rural communities. In April, the Anchorage Airport was recorded as the busiest in the world, which makes
reliable cold storage facilities even more important for the global movement of cargo. I am proud to have worked
with Senators Murkowski and Sullivan in support of this project, and am grateful to the Department of
Transportation and Secretary Chao for listening to us and making this significant investment in our state. As former
Chairman of the Transportation and Infrastructure Committee, I am acutely aware o f Alaska’s infrastructure needs.
In Congress, I will continue advocating so that Alaskans can utilize safe and reliable infrastructure for generations to
come.”
Background
Ted Stevens Anchorage International Airport is one of the busiest cargo airports in the world due, in large part, to its
central position on the shortest flying routes between the United States and the Far East. Air cargo carriers are able
to transport freight more efficiently and cost-effectively by stopping along this route to refuel at TSAIA.
Although roughly two-thirds of cargo freighters and half of the total cargo flown between the U.S. and Asia transit
through TSAIA, only a small fraction of the cargo ever leaves the aircraft for storage or sorting at the airport itself.
Anchorage currently has limited capacity for cold storage, causing many carriers to depend on other states for such
facilities.
The proposed cold storage facility, and other planned expansions, would increasingly enable air cargo carriers to
both refuel at TSAIA and store or sort freight for shipment directly to more destinations, rather than adding a stop
for sorting at a second domestic airport.
The cold storage facility is the first phase of a planned 715,000 square -foot cargo transfer and storage facility at
TSAIA.
# # #